half yearly accounts 2019 - psx.com.pk mohsin a. nathani muhammad h. habib human resource &...

HALF YEARLY ACCOUNTS

2019

OUR VISIONTo be the most respected financial institutionbased on trust, service and commitment

CONTENTS

Corporate Information

Directors’ Review

1

2

Unconsolidated Condensed Interim Statement of Financial Position

Unconsolidated Condensed Interim Profit and Loss Account

Unconsolidated Condensed Interim Statement of Comprehensive Income

Unconsolidated Condensed Interim Statement of Changes in Equity

Unconsolidated Condensed Interim Cash Flow Statement

Notes to the Unconsolidated Condensed Interim Financial Statements

Consolidated Condensed Interim Financial Statements

8

9

10

11

12

13

45

Auditors’ Review Report to the Members 7

CORPORATE INFORMATION

1

BOARD OF DIRECTORS

CHAIRMANMohamedali R. Habib

PRESIDENT & CHIEF EXECUTIVE OFFICERMohsin A. Nathani

DIRECTORSAli S. HabibAnjum Z. IqbalFirasat AliMohomed BashirMuhammad H. HabibSohail HasanTariq Ikram

BOARD COMMITTEES

AUDITAli S. HabibAnjum Z. IqbalSohail Hasan

CREDITAnjum Z. IqbalMohamedali R. HabibMohsin A. NathaniMuhammad H. Habib

HUMAN RESOURCE & REMUNERATIONFirasat AliMohsin A. NathaniTariq Ikram

COMPANY SECRETARYAther Ali Khan

REGISTERED OFFICEGround Floor, Spencer’s Building,I. I. Chundrigar Road,Karachi – 74200, Pakistan.

INFORMATION TECHNOLOGYAnjum Z. IqbalFirasat AliMohsin A. Nathani

SHARE REGISTRARCDC Share Registrar Services LimitedCDC House, 99-B, Block-BS.M.C.H.S., Main Shahra-e-FaisalKarachi - 74400.

RISK & COMPLIANCEAnjum Z. IqbalFirasat AliMohsin A. Nathani

2

DIRECTORS’ REVIEW

On behalf of the Board of Directors of Habib Metropolitan Bank, I am pleased to present theun-audited accounts for the Half Year ended 30th June 2019.

A significant reduction of 31.7 percent was witnessed in the current account deficit duringJuly-June FY19. This improvement was primarily driven by a curtailment in imports and a healthygrowth in workers' remittances. While export volumes have grown, the values remain flat due toa fall in unit prices. The fiscal deficit deteriorated in FY19, due to a substantial shortfall in revenuecollection, higher interest payments and security related expenditures. Going forward, fiscaldiscipline is expected to improve through an ambitious target for tax collection and tight controlover expenditures. Private sector credit growth also witnessed a deceleration in FY19. Private sectorcredit was augmented by 11.4 percent during FY19, compared to a higher growth of 14.8 percentin the previous period, with growth being primarily driven by higher input prices that led toincreased working capital requirements.

The GDP growth for FY19 is being provisionally estimated at 3.3 percent. Broad-based indicatorscurrently suggest a slow down in economic activity. However, going forward, a modest pick-upin economic activity is expected due to improvements in market and investor sentiments, growthin the agriculture sector and impact of government incentives for export industries. Accordingly,the SBP forecasts a real GDP growth of around 3.5 percent in FY20.

With the disbursement of first tranche of the IMF Extended Fund Facility, the SBP's foreign exchangereserves increased to USD 8 billion by mid-July 2019, and going forward are expected to furtherincrease due to the commitments from multi-lateral and bi-lateral partners and the activation ofthe Saudi oil facility, which will contribute towards an improved current account deficit in FY20.

Inflation rose considerably to 7.3 percent in FY19 due to higher government borrowing from theSBP, exchange rate depreciation and rising food and fuel prices. CPI inflation marked at 8.9 percentin June 2019 and is expected to rise in the near term due to the impact of FY20 budget. As perSBP projection, inflationary pressures are expected to further increase during the fiscal year, withinflation being forecasted to average at 11 - 12 percent in FY20.

During the period under review, the SBP raised the policy rate by 250bps to 12.25 percent. On16th July 2019, the SBP has further raised the policy rate by 100 bps to 13.25 percent.

By the Grace of Allah, HabibMetro continues to maintain its performance. The Bank's investments,advances and deposits grew to Rs. 399,405 million, Rs. 272,915 million and Rs. 592,009 millionrespectively as at 30th June 2019.

3

The Bank posted a profit before tax of Rs. 5,699 million for the Half Year ended 30th June 2019 asagainst Rs. 4,747 million for the corresponding period last year, an increase of 20 percent. Theprofit after tax for the Half Year ended 30th June 2019 was Rs. 3,176 million which translates intoan earnings per share of Rs. 3.03.

The Bank continues to enjoy AA+ (Double A Plus) ratings for long term and A1+ (A one plus) ratingsfor short term by the Pakistan Credit Rating Agency Limited (PACRA) for the eighteenth consecutiveyear. These ratings denote a very high credit quality, a very low expectation of credit risk, and avery strong capacity for timely payment of financial commitments.

With a network of 354 branches in 112 cities across Pakistan including 31 Islamic banking branchesand 219 Islamic banking windows, HabibMetro provides comprehensive banking services andproducts. These include specialized trade finance products, besides an array of products andservices like secured SMS and Web & Mobile Banking services, globally accepted Visa Card andnationwide ATM network.

In the end, I would like to take this opportunity to place on record our sincere gratitude to theMinistry of Finance, the State Bank of Pakistan, and the Securities and Exchange Commission ofPakistan for their support and continued guidance. I would also like to thank our valued customersfor their trust and support. Lastly, I would like to thank the staff of HabibMetro for their continueddedication and hard work.

On behalf of the Board

MOHSIN A. NATHANIPresident & Chief Executive OfficerKarachi: 22 August 2019

INDEPENDENT AUDITORS' REVIEW REPORT TO THE MEMBERS OF HABIBMETROPOLITAN BANK LIMITED

Report on review of Interim Financial StatementsIntroduction

We have reviewed the accompanying condensed interim statement of financial position of HabibMetropolitan Bank Limited (“the Bank”) as at 30 June 2019 and the related condensed interimstatement of profit or loss and other comprehensive income, condensed interim statement ofchanges in equity, and condensed interim statement of cash flows, and notes to the financialstatements for the six-month period then ended (here-in-after referred to as the "interim financialstatements"). Management is responsible for the preparation and presentation of this interimfinancial statements in accordance with accounting and reporting standards as applicable inPakistan for interim financial reporting. Our responsibility is to express a conclusion on these interimfinancial statements based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity".A review of interim financial statements consists of making inquiries, primarily of persons responsiblefor financial and accounting matters, and applying analytical and other review procedures. A reviewis substantially less in scope than an audit conducted in accordance with International Standardson Auditing and consequently does not enable us to obtain assurance that we would becomeaware of all significant matters that might be identified in an audit. Accordingly, we do not expressan audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that theaccompanying interim financial statements are not prepared, in all material respects, in accordancewith accounting and reporting standards as applicable in Pakistan for interim financial reporting.

Other Matter

The figures for the quarter ended 30 June 2019 in the condensed interim profit and loss accountand condensed interim statement of comprehensive income have not been reviewed and we donot express a conclusion on them.

The engagement partner on the engagement resulting in this independent auditor's review reportis Amyn Pirani.

KPMG Taseer Hadi & Co.Chartered AccountantsKarachi: 27 August 2019

7

8

UNCONSOLIDATED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION

The annexed notes 1 to 38 form an integral part of these unconsolidated condensed interim financial statements.

30 June

(Un-Audited)

31 December2018

(Audited)

Note

Rupees in ‘000

AS AT 30 JUNE 2019

2019

ASSETS

Cash and balances with treasury banks 6 84,573,941 48,177,009Balances with other banks 7 1,621,024 1,115,557Lendings to financial institutions 8 21,148,260 11,984,795Investments 9 399,404,724 346,665,904Advances 10 272,914,633 226,689,617Fixed assets 11 7,602,079 3,899,579Intangible assets 12 69,089 121,442Deferred tax assets 13 5,759,987 5,821,182Other assets 14 45,789,684 28,920,696

838,883,421 673,395,781

LIABILITIES

Bills payable 15 14,363,746 12,173,407Borrowings 16 150,674,025 51,347,381Deposits and other accounts 17 592,009,324 543,577,510Liabilities against assets subject to finance lease – –Sub-ordinated debts – –Deferred tax liabilities – –Other liabilities 18 44,293,014 29,295,527

801,340,109 636,393,825NET ASSETS 37,543,312 37,001,956

REPRESENTED BY

Share capital 10,478,315 10,478,315Reserves 16,902,913 16,267,793(Deficit) / surplus on revaluation of assets - net of tax 19 (6,130,078) (5,573,656)Unappropriated profit 16,292,162 15,829,504

37,543,312 37,001,956

CONTINGENCIES AND COMMITMENTS 20

Chief Financial Officer President &Chief Executive Officer

Director Director ChairmanFUZAIL ABBAS MOHSIN A. NATHANI SOHAIL HASAN TARIQ IKRAM MOHAMEDALI R. HABIB

9

Mark-up / return / interest earned 22 16,670,668 30,674,001 9,933,452 19,781,804Mark-up / return / interest expensed 23 (12,559,027) (22,068,472) (5,850,727) (11,997,902)

Net mark-up / interest income 4,111,641 8,605,529 4,082,725 7,783,902

NON MARK-UP / INTEREST INCOME

Fee and commission income 24 1,246,294 2,433,483 939,465 1,863,259Dividend income 15,681 36,169 37,363 43,168Foreign exchange income 901,088 1,358,716 468,598 739,575Income / (loss) from derivatives – – – –Gain / (loss) on securities 25 (729,312) (718,734) 68,974 87,123Other income 26 99,257 205,703 80,007 394,589Total non-mark-up / interest income 1,533,008 3,315,337 1,594,407 3,127,714Total Income 5,644,649 11,920,866 5,677,132 10,911,616

NON MARK-UP / INTEREST EXPENSES

Operating expenses 27 3,075,114 6,177,296 2,891,371 5,624,521Workers welfare fund 50,000 110,000 48,000 96,000Other charges 28 40,581 41,295 14,644 14,802

Total non-mark-up / interest expenses (3,165,695) (6,328,591) (2,954,015) (5,735,323)

Profit before provisions 2,478,954 5,592,275 2,723,117 5,176,293

(Provisions) / reversal and write offs - net 29 240,485 106,857 (331,716) (429,137)Extra ordinary / unusual items – – – –

PROFIT BEFORE TAXATION 2,719,439 5,699,132 2,391,401 4,747,156

Taxation 30 (1,052,435) (2,523,533) (1,017,739) (1,799,924)

PROFIT AFTER TAXATION 1,667,004 3,175,599 1,373,662 2,947,232

Basic and diluted earnings per share 31 1.59 3.03 1.31 2.81

UNCONSOLIDATED CONDENSED INTERIMPROFIT AND LOSS ACCOUNT (UN-AUDITED)

FOR THE QUARTER AND HALF YEAR ENDED 30 JUNE 2019

Quarterended

Rupees in ‘000

Half yearended

30 June 2019Quarterended

Half yearended

Note 30 June 2018

Rupees




10

UNCONSOLIDATED CONDENSED INTERIM

FOR THE QUARTER AND HALF YEAR ENDED 30 JUNE 2019STATEMENT OF COMPREHENSIVE INCOME (UN-AUDITED)


Profit after taxation 1,667,004 3,175,599 1,373,662 2,947,232

Other comprehensive income

Items that may be reclassified to profit and lossin subsequent periods:

Movement in (deficit) on revaluation ofinvestments - net of tax (1,089,336) (554,998) (581,842) (1,833,157)

Items that will not be reclassified to profit and lossin subsequent periods:

Remeasurement (loss) / gain on defined benefitobligations - net of tax (2,460) 16,418 (27,831) (16,485)

Total comprehensive income 575,208 2,637,019 763,989 1,097,590

Quarterended

Rupees in ‘000

Half yearended


Half yearended

30 June 2018



Balance as at 1 January 2018 10,478,315 2,550,985 10,744,330 240,361 1,500,000 759,367 182,331 14,042,566 40,498,255Profit after taxation – – – – – – – 2,947,232 2,947,232Other comprehensive income - net of tax – – – – – (1,833,157) – (16,485) (1,849,642)Total comprehensive income

for the period – – – – – (1,833,157) – 2,930,747 1,097,590Transfer to statutory reserve – – 589,446 – – – – (589,446) –Transfer from surplus on

revaluation of assets tounappropriated profit- net of tax – – – – – – (1,424) 1,424 –

Transactions with owners,recorded directly in equity

Cash dividend (Rs. 3.00 per share)for the year ended 31December 2017 – – – – – – – (3,143,494) (3,143,494)

Balance as at 30 June 2018 10,478,315 2,550,985 11,333,776 240,361 1,500,000 (1,073,790) 180,907 13,241,797 38,452,351Profit after taxation – – – – – – – 3,213,352 3,213,352Other comprehensive income

- net of tax – – – – – (4,679,327) – 15,580 (4,663,747)Total comprehensive income

for the period – – – – – (4,679,327) – 3,228,932 (1,450,395)Transfer to statutory reserve – – 642,671 – – – – (642,671) –Transfer from surplus on revaluation

of assets to unappropriatedprofit - net of tax – – – – – – (1,446) 1,446 –

Balance as at 31 December 2018 10,478,315 2,550,985 11,976,447 240,361 1,500,000 (5,753,117) 179,461 15,829,504 37,001,956Profit after taxation – – – – – – – 3,175,599 3,175,599Other comprehensive income

- net of tax – – – – – (554,998) – 16,418 (538,580)Total comprehensive income

for the period – – – – – (554,998) – 3,192,017 2,637,019Transfer to statutory reserve – – 635,120 – – – – (635,120) –Transfer from surplus on revaluation

of assets to unappropriatedprofit - net of tax – – – – – – (1,424) 1,424 –


Cash dividend (Rs. 2.00 per share)for the year ended 31December 2018 – – – – – – – (2,095,663) (2,095,663)

Balance as at 30 June 2019 10,478,315 2,550,985 12,611,567 240,361 1,500,000 (6,308,115) 178,037 16,292,162 37,543,312

11

FOR THE HALF YEAR ENDED 30 JUNE 2019

Statutoryreserve

Specialreserve

Revenuereserve Investments

Non-banking

assets

Un-appropriated

profit

Rupees in ‘000

Reserves

TotalSharepremium

Sharecapital

Surplus / (deficit) onrevaluation


UNCONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY (UN-AUDITED)



12

UNCONSOLIDATED CONDENSED INTERIM CASH FLOW STATEMENT (UN-AUDITED)FOR THE HALF YEAR ENDED 30 JUNE 2019


CASH FLOWS FROM OPERATING ACTIVITIESProfit before taxation 5,699,132 4,747,156Less: Dividend income (36,169) (43,168)

5,662,963 4,703,988Adjustments

Depreciation on operating fixed assets 472,804 399,211Depreciation on right-of-use assets 354,141 –Depreciation on non banking assets 5,577 6,377Amortization 59,774 62,377Mark-up / return / interest expensed on lease liability against right-of-use assets 228,766 –(Reversals) / provisions and write offs excluding recovery of written off bad debts 29 (103,327) 476,981Net gain on sale of fixed assets (9,526) (907)Net gain on sale of non-banking assets 26 – (202,282)Net gain on sale of non-current assets held-for-sale 26 – (35,042)Provision against workers welfare fund 110,000 96,000Provision against compensated absences 26,708 37,620Provision against defined benefit plan 85,486 73,839

1,230,403 914,1746,893,366 5,618,162

(Increase) / decrease in operating assetsLendings to financial institutions (9,163,465) 1,129,755Advances (46,089,969) (17,438,796)Other assets (excluding current taxation) (15,431,562) (1,054,911)

(70,684,996) (17,363,952)Increase / (decrease) in operating liabilities

Bills payable 2,190,339 (6,373,176)Borrowings from financial institutions 97,886,448 9,807,938Deposits and other accounts 48,431,814 13,007,625Other liabilities (excluding current taxation) 9,288,555 (693,886)

157,797,156 15,748,50194,005,526 4,002,711

Payment against compensated absences (16,347) (23,420)Income tax paid (2,531,115) (1,976,359)

Net cash flows from operating activities 91,458,064 2,002,932CASH FLOWS FROM INVESTING ACTIVITIES

Net investments in available-for-sale securities (53,665,534) 9,013,804Net investments in held-to-maturity securities 41,150 (1,569,429)Dividend received 6,502 103,002Investments in fixed assets 11.2 (738,469) (336,133)Investments in intangibles assets (7,420) (7,647)Proceeds from sale of fixed assets 14,443 10,751Proceeds from sale of non-banking assets – 600,000Proceeds from sale of non-current assets held-for-sale – 250,000

Net cash flows from investing activities (54,349,328) 8,064,348CASH FLOWS FROM FINANCING ACTIVITIES

Dividend paid (1,294,803) (3,113,847)Payment of lease against right-of-use assets (351,730) –

Net cash flows from financing activities (1,646,533) (3,113,847)Increase in cash and cash equivalents 35,462,203 6,953,433Cash and cash equivalents at beginning of the period 46,103,870 41,571,637Cash and cash equivalents at end of the period 81,566,073 48,525,070

30 June2019

30 June2018

Note

Rupees in ‘000



13

NOTES TO THE UNCONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTSFOR THE HALF YEAR ENDED 30 JUNE 2019

1. STATUS AND NATURE OF BUSINESS

Habib Metropolitan Bank Limited (the Bank) was incorporated in Pakistan on 3 August 1992, as a public limited company,under the Companies Ordinance, 1984 (now Companies Act, 2017) and is engaged in commercial banking and relatedservices. Its shares are listed on the Pakistan Stock Exchange. The Bank operates 324 (31 December 2018: 322) branches,including 31 (31 December 2018: 31) Islamic banking branches and 30 (31 December 2018: 30) sub branches in Pakistan.The Bank is a subsidiary of Habib Bank AG Zurich - Switzerland (the holding company with 51% shares in the Bank) whichis incorporated in Switzerland.

The registered office of the Bank is situated at Spencer's Building, I.I. Chundrigar Road, Karachi.

2. BASIS OF PRESENTATION

2.1 These unconsolidated condensed interim financial statements represent separate financial statements of theBank. The consolidated financial statements of the Bank and its subsidiary companies are being separately issued.

2.2 Statement of Compliance

2.2.1 These unconsolidated condensed interim financial statements have been prepared in accordance withthe accounting and reporting standards as applicable in Pakistan for interim financial reporting. Theaccounting and reporting standards as applicable in Pakistan for interim financial reporting comprise of:

– International Accounting Standard (IAS) 34 "Interim Financial Reporting" issued by the InternationalAccounting Standards Board (IASB) as notified under the Companies Act, 2017;

– Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered Accountants ofPakistan, as are notified under the Companies Act, 2017;

– Provisions of and directives issued under the Banking Companies Ordinance, 1962 and theCompanies Act, 2017; and

– Directives issued by the State Bank of Pakistan (SBP) and the Securities and Exchange Commissionof Pakistan (SECP).

Whenever the requirements of the Banking Companies Ordinance, 1962, the Companies Act, 2017 or thedirectives issued by the SBP and the SECP differ with the requirements of the IAS 34 or IFAS, requirementsof the Banking Companies Ordinance, 1962, the Companies Act, 2017 and the said directives shall prevail.

The SBP vide BSD Circular No. 10, dated 26 August 2002 has deferred the applicability of InternationalAccounting Standard (IAS) 39 "Financial Instruments: Recognition and Measurement" and IAS 40 "InvestmentProperty" for banking companies till further instructions. Further, according to a notification of theSecurities and Exchange Commission of Pakistan (SECP) through S.R.O. No. 411 (1) / 2008 dated 28 April 2008, IFRS 7 "Financial Instruments: Disclosures" has not been made applicable for banks. Accordingly,the requirements of these standards have not been considered in the preparation of these unconsolidatedcondensed interim financial statements. However, investments have been classified and valued inaccordance with the requirements of various circulars issued by the SBP.

The Securities and Exchange Commission of Pakistan (SECP) has notified Islamic Financial AccountingStandard (IFAS) 3, 'Profit and Loss Sharing on Deposits' issued by the Institute of Chartered Accountantsof Pakistan. IFAS 3 shall be followed with effect from the financial periods beginning on or after

14

1 January 2014 in respect of accounting for transactions relating to 'Profit and Loss Sharing on Deposits'as defined by the said standard. The standard has resulted in certain new disclosures in the financialstatements of Banks. The SBP through BPRD Circular Letter No. 4 dated 25 February 2015, has deferredthe applicability of IFAS 3 till further instructions and prescribed the Banks to prepare their annual andperiodical financial statements as per existing prescribed formats.

2.2.2 The disclosures and presentations made in these unconsolidated condensed interim financial statementsare based on a format prescribed by the SBP vide BPRD Circular Letter No. 5 dated 22 March 2019 andIAS 34, Interim Financial Reporting. They do not include all the disclosures required for annual financialstatements, and these unconsolidated condensed interim financial statements should be read in conjunctionwith the audited unconsolidated financial statements of the Bank for the year ended 31 December 2018.

3. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies and method of computation adopted in the preparation of these unconsolidatedcondensed interim financial statements are consistent with those applied in the preparation of the audited unconsolidatedfinancial statements of the Bank for the year ended 31 December 2018 except for the changes explained in note 3.1 tothese financial statements.

3.1 Amendments to approved accounting standards that are effective in the current period

3.1.1 IFRS 16 became effective for annual reporting period commencing on or after 1 January 2019. The impactof the adoption of IFRS 16 is given in note 3.2 to these financial statements.

3.1.2 In addition, as mentioned in note 2.2.2 above, the disclosures and the presentations in the condensedinterim financial statements are on a format prescribed by the State Bank of Pakistan vide BPRD CircularLetter No. 5 dated 22 March 2019 and IAS 34, "Interim Financial Reporting". Earlier upto 30 June 2018, thedisclosures and presentations were in accordance with the format prescribed by the State Bank of Pakistanvide BSD Circular Letter No. 2 dates 12 May 2004 and BPRD Circular Letter No. 5 dated 29 February 2016and IAS 34 "Interim Financial Reporting". However the adoption of the new format has only resulted incertain additional disclosures and presentations. Corresponding figures have also been so presented.

3.1.3 There are certain other new and amended standards, interpretations and amendments that are mandatoryfor the Bank's accounting periods beginning on or after 1 January 2019 but are considered not to berelevant or do not have any significant effect on the Bank's operations and therefore are not detailed inthese unconsolidated condensed interim financial statements.

3.2 Adoption of International Financial Reporting Standards (IFRS) 16 - Leases

3.2.1 On 1 January 2019, the Bank adopted IFRS 16 Leases. This IFRS has introduced a single lease accountingmodel and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12months, unless the underlying asset is of low value. A lessee is required to recognize a right-of use assetrepresenting its right to use the underlying leased asset and a lease liability representing its obligationto make lease payments. IFRS 16 substantially carries forward the lessor accounting requirements in IAS17 - Leases. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, andto account for these two types of leases differently.

The significant judgments in the implementation were determining if a contract contained a lease, and thedetermination of whether the Bank is reasonably certain that it will exercise extension options present in leasecontracts. The significant estimates were the determination of incremental borrowing rates. The weightedaverage discount rate applied to lease liabilities on the transition date 1 January 2019 was 13.24 percent.

15

The impact of IFRS 16 on the Bank is primarily where the Bank is a lessee in property lease contracts. TheBank has elected to adopt simplified approach on transition and has not restated comparative information.On 1 January 2019, the Bank recognized a lease liability, being the remaining lease payments, includingextension options where renewal is reasonably certain, discounted using the Bank’s incremental borrowingrate at the date of initial application. The corresponding right-of-use asset recognized is the amount ofthe lease liability adjusted by prepaid or accrued lease payments related to those leases. The balancesheet has increased as a result of the recognition of lease liability and right-to-use assets as of 1 January2019 was Rs. 3,487,447 thousand with no adjustment to retained earnings. The asset is presented in ‘FixedAssets’ and the liability is presented in ‘Other liabilities’. Also in relation to those leases under IFRS 16, theBank has recognized depreciation and interest costs, instead of operating lease expenses.

The Bank has elected not to recognize right-of-use assets and lease liabilities for some leases of low valueassets. The lease payments associated with these leases are recognized as an expenses on a straight-linebasis over the lease term. The right-of-use assets are presented in the same line items as it presentsunderlying assets of the same nature that it owns.

Upto 31 December 2018, assets held under property leases, not equivalent to ownership rights, wereclassified as operating leases and were not recognized as asset in the statement of financial position.Payments or accruals under operating leases were recognised in profit and loss on a straight line basisover term of the lease.

The effect of this change in accounting policy is as follows:

Impact on Statement of Financial Position

Increase in fixed assets - right-of-use assets 3,441,752Decrease in other assets - advances, deposits and other prepayments (215,683)Increase in other assets - taxation 53,981

3,280,050Increase in other liabilities - lease liability against right-of-use assets (3,364,483)

Decrease in net assets (84,433)

30 June2019

Rupees in ‘000

Impact on Profit and Loss account

Increase in mark-up expense - lease liability against right-of-use assets (228,766)(Increase) / decrease in administrative expenses:- Depreciation on right-of-use assets (354,141)- Rent expense 444,493

Decrease in profit before tax (138,414)Decrease in tax 53,981

Decrease in profit after tax (84,433)

Rupees in ‘000

Half yearended

30 June2019

16

3.2.2 In view of the application of above IFRS, the Bank's accounting policy for right-of-use assets and its relatedlease liability is as follow:

A contract is, or contains a lease if the contract conveys a right to control the use of an identified assetfor a period of time in exchange for consideration. The Bank mainly leases properties for its operations.The Bank recognizes a right-of-use asset and lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation andimpairment losses, and adjusted for certain remeasurements of the lease liability. The right-of-use assetis depreciated using the straight line method from the commencement date to the earlier of end of theuseful life of right-of-use asset or end of the lease term. The estimated useful lives of assets are determinedon the same basis as that for owned assets. In addition, the right-of-use asset is periodically reduced byimpairment losses, if any.

The lease liability is initially measured at the present value of the lease payments that are not paid at thecommencement date, discounted using the interest rate implicit in the lease or, if that rate cannot bereadily determined, the Bank’s incremental borrowing rate. The lease liability is subsequently increasedby the interest cost on the lease liability and decreased by lease payments made. It is re-measured whenthere is a change in future lease payments arising from a change in an index or rate, a change in assessmentof whether extension option is reasonably certain to be exercised or a termination option is reasonablycertain not to be exercised.

3.3 Standards, interpretations of and amendments to accounting and reporting standards as applicable in Pakistanthat are not yet effective in the current year.

There are various standards, interpretations and amendments to accounting and reporting standards as applicablein Pakistan that are not effective in the current year. These are not likely to have material effect on the Bank’sfinancial statements except for the following:

IFRS 9 ‘Financial Instruments’ and amendment – Prepayment Features with Negative Compensation (effective forannual periods beginning on or after 1 July 2018 and 1 January 2019 respectively). IFRS 9 replaces the existingguidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on theclassification and measurement of financial instruments, a new expected credit loss model for calculating impairmenton financial assets, and new general hedge accounting requirements. It also carries forward the guidance on therecognition and derecognition of financial instruments from IAS 39. The Securities and Exchange Commission ofPakistan vide its notification dated 14 February 2019 modified the effective date for implementation of IFRS 9 as‘reporting period/ year ending on or after 30 June 2019 (earlier application is permitted)’. State Bank of Pakistan hasalso informed the Bank that keeping in view the implementation challenges of IFRS 9 and representations by thebanking industry, it has been decided that IFRS 9 is not applicable on the interim financials for the period ending30 June 2019 for banks/DFIs/MFBs. Accordingly, the requirements of IFRS 9 have not been considered in the preparationof these financial statements. The Bank is in the process of assessing the full impact of this standard.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The basis for accounting estimates adopted in the preparation of these unconsolidated condensed interim financialstatements are the same as that applied in the preparation of the audited unconsolidated financial statements for theyear ended 31 December 2018.

5. FINANCIAL RISK MANAGEMENT

The financial risk management objectives and policies adopted by the Bank are consistent with those disclosed in theaudited unconsolidated financial statements for the year ended 31 December 2018.

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Note

6. CASH AND BALANCES WITH TREASURY BANKS

In handLocal currency 11,975,485 7,657,613Foreign currencies 5,640,999 2,013,643

17,616,484 9,671,256

With State Bank of Pakistan in

Local currency current account 38,619,230 20,272,252Foreign currency current account 171,861 244,068Foreign currency deposit accounts – cash reserve account 4,988,664 4,151,971 – special cash reserve account 14,792,972 12,370,079

58,572,727 37,038,370

With National Bank of Pakistan in

Local currency current account 2,915,101 1,443,318

National Prize Bonds 5,469,629 24,065

84,573,941 48,177,009

7. BALANCES WITH OTHER BANKS

In PakistanIn current accounts 90,160 94,005In deposit accounts 383,622 208,066

473,782 302,071Outside Pakistan

In current accounts 1,147,242 813,4861,621,024 1,115,557

8. LENDINGS TO FINANCIAL INSTITUTIONS

Call money lendings – 3,000,000Repurchase agreement lendings (Reverse Repo) 2,993,889 4,184,795Bai-muajjal receivable with the State Bank of Pakistan 8.1 12,654,371 –Letter of placement 1,000,000 3,800,000Musharaka placements 8.2 4,500,000 1,000,000

21,148,260 11,984,795

8.1 These will mature upto 18 March 2020 and the maturity amount is Rs. 13,691,477 thousand.

8.2 These placements carry rates ranging between 11.10% to 11.70% per annum with maturity upto 29 July 2019.

Rupees in ‘000

201930 June

(Un-Audited)2018

(Audited)

31 December

18

Rupees in ‘000(Audited)

31 December2018

30 June 2019 (Un-Audited) 31 December 2018 (Audited)

Rupees in ‘000

Cost /amortised

cost

Provisionfor

diminution

Surplus /(deficit)

9. INVESTMENTS

9.1 Investments by types

Carryingvalue

Cost /amortised

cost

Provisionfor

diminution

Surplus /(deficit)

Carryingvalue

9.1.1 Investments given as collateral

Federal government securitiesMarket treasury bills 91,763,229 3,443,636Pakistan investment bonds 10,077,716 9,165,995

101,840,945 12,609,631

9.2 Provision for diminution in value of investments

9.2.1 Opening balance 417,991 537,372Charge for the period / year 36,370 100,021Reversal for the period / year (4,650) (14,442)Net charge for the period / year 31,720 85,579Reversal on disposal – (198,028)Investment written off – (6,932)Closing balance 449,711 417,991

Available-for-sale securities

Federal government securities 361,817,626 – (9,706,501) 352,111,125 307,815,954 – (8,965,814) 298,850,140

Shares 655,236 (307,280) 46,803 394,759 655,236 (273,810) 59,396 440,822

Non-government debt securities 4,620,596 (133,777) (21,314) 4,465,505 4,956,734 (138,428) 16,532 4,834,838

Mutual funds 417,571 (8,654) (23,781) 385,136 417,571 (5,753) 38,937 450,755

367,511,029 (449,711) (9,704,793) 357,356,525 313,845,495 (417,991) (8,850,949) 304,576,555

Held-to-maturity securities

Federal government securities 36,268,199 – – 36,268,199 36,259,349 – – 36,259,349

Non-government debt securities 4,950,000 – – 4,950,000 5,000,000 – – 5,000,000

41,218,199 – – 41,218,199 41,259,349 – – 41,259,349

Subsidiaries 830,000 – – 830,000 830,000 – – 830,000

Total Investments 409,559,228 (449,711) (9,704,793) 399,404,724 355,934,844 (417,991) (8,850,949) 346,665,904

30 June2019

(Un-Audited)

19

Rupees in ‘000

DomesticSubstandard – – – –Doubtful – – – –Loss 133,777 133,777 138,428 138,428

133,777 133,777 138,428 138,428

30 June 2019 (Un-Audited)

9.2.2 Particulars of provision against debt securities

31 December 2018 (Audited)

Non-performinginvestments

Provision ProvisionNon-performinginvestments

Category of classification

Exposure amounting to Rs. 25,677 thousand (31 December 2018: Rs. 59,913 thousand) relating to termfinance certificates of Pakistan International Airlines Corporation Limited, which is governmentguaranteed script, has not been classified as non-performing investment as per the relaxation givenby the SBP.

9.3 The market value of securities classified as held-to-maturity is Rs. 36,935,798 thousand (31 December 2018:Rs. 37,847,389 thousand).

10. ADVANCES

Rupees in ‘000

30 June2019

(Un-Audited)

Performing31 December

2018(Audited)

Non-Performing Total30 June

2019(Un-Audited)

31 December2018

(Audited)

30 June2019

(Un-Audited)

31 December2018

(Audited)

10.1 Particulars of advances - gross

Rupees in ‘000

In local currency 261,469,671 213,632,404In foreign currencies 27,860,684 29,617,903

289,330,355 243,250,307

30 June2019

(Un-Audited)

31 December2018

(Audited)

Loans, cash credits, running finances, etc.In Pakistan 210,592,918 172,320,248 14,217,097 14,710,168 224,810,015 187,030,416

Islamic financing and related assets 21,028,434 17,629,691 441,197 503,972 21,469,631 18,133,663Bills discounted and purchased 40,895,008 35,620,461 2,155,701 2,465,767 43,050,709 38,086,228Advances - gross 272,516,360 225,570,400 16,813,995 17,679,907 289,330,355 243,250,307Provision against non-performing advances - specific – – (14,942,200) (15,324,500) (14,942,200) (15,324,500) - general (1,473,522) (1,236,190) – – (1,473,522) (1,236,190)

(1,473,522) (1,236,190) (14,942,200) (15,324,500) (16,415,722) (16,560,690)Advances - net of provisions 271,042,838 224,334,210 1,871,795 2,355,407 272,914,633 226,689,617

20

Category of classificationDomestic

Rupees in ‘000

30 June 2019 (Un-Audited)Non-

performingloans

31 December 2018 (Audited)Non-

performingloans

Provision

10.2 Advances include Rs. 16,813,995 thousand (31 December 2018: Rs. 17,679,907 thousand) which have beenplaced under non-performing status as detailed below:

Provision

Substandard 179,179 22,740 259,378 17,562Doubtful 335,609 58,817 127,952 2,136Loss 16,299,207 14,860,643 17,292,577 15,304,802

16,813,995 14,942,200 17,679,907 15,324,500

10.3 Particulars of provision against advances

Specific General Total Specific General Total


Rupees in ‘000

In local currency 14,509,486 1,473,522 15,983,008 14,952,295 1,236,190 16,188,485In foreign currencies 432,714 – 432,714 372,205 – 372,205

14,942,200 1,473,522 16,415,722 15,324,500 1,236,190 16,560,690



Rupees in ‘000

10.2.1 Exposure amounting to Rs. 5,302,737 thousand relating to certain facilities of Power Holding (Private)Limited, has not been classified as non-performing as the SBP has allowed a relaxation from Regulation - 8of the Prudential Regulation. The above exposure is fully guranteed by the Government of Pakistan anddoes not required any provision.

Opening balance 15,324,500 1,236,190 16,560,690 16,168,582 257,841 16,426,423Charge for the year 507,537 237,332 744,869 936,036 978,349 1,914,385Reversals (879,916) – (879,916) (1,482,574) – (1,482,574)Net charge / (reversal) for the period / year (372,379) 237,332 (135,047) (546,538) 978,349 431,811Amount written off (9,921) – (9,921) (297,544) – (297,544)Closing balance 14,942,200 1,473,522 16,415,722 15,324,500 1,236,190 16,560,690

10.3.1 General provision includes provision of Rs. 6,226 thousand (31 December 2018: Rs. 5,134 thousand) madeagainst consumer portfolio and Rs. 95 thousand (31 December 2018: Rs. 35 thousand) made against smallenterprises (SEs) portfolio as required by the Prudential Regulation issued by the SBP.

10.3.2 Particulars of provision against advances

21

10.3.3 Consideration of forced sales value (FSV) for the purposes of provisioning against non-performing loansDuring the current period, the Bank availed additional forced sale value (FSV) benefit under BSD CircularNo. 1 of 21 October 2011. This has resulted in reduction of provision against non-performing loans andadvances by Rs. 93,551 thousand (31 December 2018: 628,190 thousand). Further, as of 30 June 2019,had the benefit of FSVs (including those availed into previous years) not been taken by the Bank, thespecific provision against non-performing advances would have been higher by Rs. 1,569,606 thousand(31 December 2018: Rs. 2,096,898 thousand) and accumulated profit would have been lower byRs. 1,020,244 thousand (31 December 2018: Rs. 1,362,983 thousand). This amount of Rs. 1,020,244thousand (31 December 2018: Rs. 1,362,983 thousand) is not available for distribution of cash and stockdividend to the shareholders and bonus to employees.

Note

Rupees in ‘000

30 June2019

(Un-Audited) (Audited)

31 December2018

11. FIXED ASSETSCapital work-in-progress 11.1 118,461 142,460Property and equipment 4,041,866 3,757,119Right-of-use assets 3.2.1 3,441,752 –

7,602,079 3,899,57911.1 Capital work-in-progress

Civil works 81,691 22,739Equipment 31,950 110,420Advance to suppliers 4,820 9,301

118,461 142,460

11.2 Additions to fixed assetsThe following additions have been made to fixed assets during the period:Capital work-in-progress (transfer to fixed assets) / additions - net (23,999) 83,525

Property and equipmentBuilding on leasehold land 149,102 –Furniture and fixture 29,616 19,483Electrical office and computer equipment 458,623 168,677Vehicles 27,978 35,803Lease hold improvement 97,149 28,645

762,468 252,608Total 738,469 336,133

11.3 Disposal of fixed assetsThe net book value of fixed assets disposed off during the period is as follows:Furniture and fixture 40 89Electrical office and computer equipment 457 1,191Vehicles 4,420 6,278Lease hold improvement – 2,286Total 4,917 9,844

Rupees in ‘000

20182019(Un-Audited)

30 June30 JuneHalf year ended

Rupees in ‘000



22

12. INTANGIBLE ASSETS

Computer software 69,089 121,442

12.1 The following additions have been made to intangible assets during the period:

Rupees in ‘000

30 June2019


31 December2018

Additions: - directly purchased 7,420 7,647

Rupees in ‘000

30 June2019


31 December2018

13. DEFERRED TAX ASSETS

Deductible temporary differences

Provision for diminution in value of investments 157,399 146,297Provision for non-performing loans and advances and off - balance sheet items 2,334,439 2,746,495Deficit on revaluation of investments 3,396,678 3,097,832Deferred liability on defined benefit plan 61,866 70,706

5,950,382 6,061,330Taxable temporary differences

Surplus on revaluation of non-banking assets (95,866) (96,632)Accelerated depreciation (94,529) (143,516)

(190,395) (240,148)Net deferred tax asset 5,759,987 5,821,182

23

Rupees in ‘000

30 June2019


31 December2018

Note

14. OTHER ASSETS

Income / mark-up / profit accrued in local currency 10,167,197 8,308,015Income / mark-up / profit accrued in foreign currencies 30,936 29,916Advances, deposits and other prepayments 425,218 554,859Advance taxation (payments less provision) 735,173 376,391Non-banking assets acquired in satisfaction of claims 484,119 487,505Branch adjustment account 120 63Mark to market gain on forward foreign exchange contracts 17,460,204 4,206,429Acceptances 15,792,147 14,429,148Receivable from the SBP against encashment of government securities 189,273 114,055Stationery and stamps on hand 68,258 62,236Dividend receivable 30,436 769Others 342,700 285,217

45,725,781 28,854,603

Provision against other assets - operational loss (210,000) (210,000)Other assets (net of provision) 45,515,781 28,644,603

Surplus on revaluation of non-banking assets acquired in satisfaction of claims 19 273,903 276,093

45,789,684 28,920,69615. BILLS PAYABLE

In Pakistan 14,363,746 12,173,407

24

17. DEPOSITS AND OTHER ACCOUNTS

In localcurrency

Total In localcurrency

In foreigncurrency

Total


Rupees in ‘000

In foreigncurrency

CustomersCurrent accounts

(non-remunerative) 148,677,524 29,703,316 178,380,840 120,665,276 23,351,234 144,016,510Savings deposits 129,857,516 20,980,758 150,838,274 122,955,979 17,173,301 140,129,280Term deposits 180,757,525 50,502,155 231,259,680 179,727,186 43,693,831 223,421,017Others 9,470,460 1,012 9,471,472 7,984,099 906 7,985,005

468,763,025 101,187,241 569,950,266 431,332,540 84,219,272 515,551,812Financial institutionsCurrent deposits

(non-remunerative) 1,244,348 975,870 2,220,218 1,492,887 942,405 2,435,292Savings deposits 12,158,930 – 12,158,930 24,280,076 70 24,280,146Term deposits 7,675,000 4,910 7,679,910 1,306,000 4,260 1,310,260

21,078,278 980,780 22,059,058 27,078,963 946,735 28,025,698489,841,303 102,168,021 592,009,324 458,411,503 85,166,007 543,577,510

Rupees in ‘000

30 June2019


31 December2018

16. BORROWINGSSecuredBorrowings from the State Bank of Pakistan

Under export refinance scheme 31,171,116 24,196,093Under long term financing facility - renewable energy 962,784 962,784Under long term financing facility - locally

manufactured plant and machinery 8,935,332 6,730,91541,069,232 31,889,792

Repurchase agreement borrowings (Repo) 16.1 101,732,435 12,658,729Due against bills rediscounting 3,243,466 3,310,164

146,045,133 47,858,685UnsecuredCall borrowing – 300,000Overdrawn nostro accounts 4,623,199 3,183,003Overdrawn local bank accounts 5,693 5,693

4,628,892 3,488,696150,674,025 51,347,381

16.1 These carry mark-up rates ranging between 12.25 % to 12.42 % per annum and will mature upto 26 July 2019.

25

18. OTHER LIABILITIES

Mark-up / return / interest payable in local currency 8,083,054 6,492,116Mark-up / return / interest payable in foreign currencies 277,720 362,013Unearned commission and income on bills discounted 189,296 190,533Accrued expenses 941,331 692,845Acceptances 15,792,147 14,429,148Unclaimed dividend 867,076 66,216Mark to market loss on forward foreign exchange contracts 11,155,193 3,549,157Provision for compensated absences 219,225 208,864Deferred liability on defined benefit plan 259,297 199,072Provision against off-balance sheet obligations 18.1 113,716 113,716Workers' welfare fund 1,032,189 922,189Charity fund 493 291Excise duty payable 1,062 1,003Locker deposits 792,753 764,223Advance against diminishing musharaka 59,594 23,310Advance rental for ijarah 1,806 2,259Security deposits against leases / ijarah 218,027 212,178Sundry creditors 384,156 392,267Lease liability against right-of-use assets 3.2.1 3,364,483 –Withholding tax / duties 272,068 289,241Others 268,328 384,886

44,293,014 29,295,527

Rupees in ‘000

30 June2019


31 December2018

Note

18.1 Provision against off-balance sheet obligationsOpening balance 113,716 113,716Charge for the period / year – –Closing balance 113,716 113,716

The above represents provision against certain letters of credit and guarantees.

19. (DEFICIT) / SURPLUS ON REVALUATION OF ASSETS(Deficit) / surplus on revaluation of

- Non-banking assets 273,903 276,093- Available-for-sale securities 9.1 (9,704,793) (8,850,949)

(9,430,890) (8,574,856)Less: Deferred tax on (deficit) / surplus on revaluation of

- Non-banking assets 95,866 96,632- Available-for-sale securities (3,396,678) (3,097,832)

3,300,812 3,001,200(6,130,078) (5,573,656)

26

20. CONTINGENCIES AND COMMITMENTS

Guarantees 20.1 61,408,275 53,215,390Commitments 20.2 409,459,085 322,747,745Other contingent liabilities 20.3 25,401,940 24,476,694

496,269,300 400,439,829

20.1 GuaranteesFinancial Guarantees 5,978,479 3,931,150Performance Guarantees 26,817,595 32,514,435Other guarantees 28,612,201 16,769,805

61,408,275 53,215,390

20.2 CommitmentsDocumentary credits and short-term trade-related transactions:

Letters of credit 76,815,611 89,700,969Commitments in respect of:

Forward exchange contracts 20.2.1 328,079,236 230,915,612Operating leases 20.2.2 2,573 110,571Forward lendings 20.2.3 4,440,923 1,887,433Acquisition of operating fixed assets 120,742 133,160

409,459,085 322,747,745

20.2.1 Commitments in respect of forward exchange contractsPurchase 188,802,754 136,568,523Sale 139,276,482 94,347,089

328,079,236 230,915,612

20.2.2 Commitments in respect of operating leasesNot later than one year 2,573 110,571Later than one year and not later than five years – –

2,573 110,571

The above amount includes non-cancellable lease agreements with a Modaraba which has been duly approvedby the Religious Board as Ijarah transactions. The monthly rental installments are spread over a period of 36 months.When a lease is terminated before the lease period has expired, any payment required to be made to the lessorby way of penalty is recognised as an expense in the period in which termination takes place.

Rupees in ‘000

30 June2019


31 December2018

Note

27

2018

Commitments in respect of syndicate financing 4,440,923 1,887,433

20.3 Other contingent liabilities

Claims against bank not acknowledged as debt 25,295,884 24,370,638Foreign exchange repatriation case 20.3.1 106,056 106,056

25,401,940 24,476,694

20.3.1 Foreign exchange repatriation case

While adjudicating foreign exchange repatriation cases of exporters, the Foreign Exchange AdjudicatingCourt of the State Bank of Pakistan has adjudicated penalty of Rs. 106,056 thousand, arbitrarily onthe Bank. The Bank has filed appeals before the Appellate Board and Constitutional Petitions in theHonorable High Court of Sindh against the said judgment. The Honorable High Court has grantedrelief to Bank by way of interim orders. Based on merits of the appeals management is confidentthat these appeals shall be decided in favor of the Bank and therefore no provision has been madeagainst the impugned penalty.

Rupees in ‘000

2019(Un-Audited)

31 December

(Audited)

30 June

20.2.3 Commitments in respect of forward lendingsThe Bank has made commitments to extend credit in the normal course of its business, but noneof these commitments are irrevocable and do not attract any penalty if the facility is unilaterallywithdrawn, except for:

Note

21. DERIVATIVE FINANCIAL INSTRUMENTS

The Bank deals in derivative financial instruments namely forward foreign exchange contracts and foreign currency swapswith the principal view of hedging the risks arising from its trade business.

As per the Bank’s policy, these contracts are reported on their fair value at the statement of financial position date. Thegains and losses from revaluation of these contracts are included under “income from dealing in foreign currencies”.Unrealised mark-to-market gains and losses due on these contracts are recorded on the statement of financial positionunder “other assets / other liabilities”.

These products are offered to the Bank’s customers to protect from unfavourable movements in foreign currencies. TheBank hedges such exposures in the inter-bank foreign exchange market.

These positions are reviewed on a regular basis by the Bank’s Asset and Liability Committee (ALCO).

28

22. MARK-UP / RETURN / INTEREST EARNED

Loans and advances 11,670,651 5,645,977Investments 15,763,737 13,746,535Lendings to financial institutions 3,228,384 387,110Balance with other banks 11,229 2,182

30,674,001 19,781,804

23. MARK-UP / RETURN / INTEREST EXPENSED

Deposits 17,677,587 9,430,634Borrowings 2,238,787 2,044,491Foreign currency swap cost 1,923,332 522,777Lease liability against right-of-use assets 228,766 –

22,068,472 11,997,902

24. FEE & COMMISSION INCOME

Branch banking customer fees 122,844 135,375Credit related fees 30,292 23,492Card related fees 178,408 126,200Commission on trade 1,760,757 1,282,701Commission on guarantees 228,739 195,907Commission on remittances including home remittances 14,931 14,255Commission on bancassurance 57,548 40,554Others 39,964 44,775

2,433,483 1,863,259

25. GAIN / (LOSS) ON SECURITIES

RealisedFederal government securities (725,310) 16,529Mutual funds 6,576 70,594

(718,734) 87,123

26. OTHER INCOME

Rent on properties 19,143 13,863Gain on sale of fixed assets - net 9,526 907Recovery of charges from customers 132,244 100,341Incidental and service charges 42,723 40,304Gain on sale of ijarah assets - net 50 74Gain on sale of non-banking assets – 202,282Gain on sale of non-current assets held-for-sale - net – 35,042Staff notice period and other recoveries 2,017 1,776

205,703 394,589

Rupees in ‘000



29

27. OPERATING EXPENSES

Total compensation expense 2,874,394 2,726,450

Property expenseRent & taxes 155,018 529,059Insurance 2,490 2,088Utilities cost 167,345 145,734Security 231,856 216,377Repair & maintenance 177,990 188,413Depreciation 549,820 171,879

1,284,519 1,253,550

Information technology expensesSoftware maintenance 56,601 15,912Hardware maintenance 68,954 61,340Depreciation 71,342 54,149Amortisation 59,774 62,377Network charges 97,170 75,296

353,841 269,074

Other operating expensesDirectors' fees and allowances 5,698 6,648Fees and allowances to shariah board 5,137 4,158Legal & professional charges 73,770 64,723Outsourced services costs 128,716 113,911Travelling & conveyance 117,847 81,669Operating lease rental 7,841 15,582NIFT clearing charges 37,513 35,261Depreciation 205,783 173,183Depreciation - non-banking assets 5,577 6,377Training & development 12,681 9,636Postage & courier charges 44,773 39,214Communication 49,423 46,265Subscription 77,157 67,437Brokerage & commission 52,517 51,571Stationery & printing 110,815 89,199Marketing, advertisement & publicity 71,489 154,238Management fee 202,554 174,791Insurance 254,412 83,087Donations 50,400 45,620Auditors’ remuneration 8,514 8,714Others 141,925 104,163

1,664,542 1,375,447

Total 6,177,296 5,624,521

Rupees in ‘000



30

28. OTHER CHARGES

Penalties imposed by the SBP 41,295 14,802

29. PROVISIONS & WRITE OFFS - NET

Provision for diminution in value of investments - net 9.2.1 31,720 24,481Provision / (reversal) of provision against loan & advances - net 10.3 (135,047) 493,750Reversal of provision against other assets – (41,250)Recovery of written off bad debts (3,530) (47,844)

(106,857) 429,13730. TAXATION

Current 1,871,785 1,720,102Prior year 300,548 –Deferred 351,200 79,822

2,523,533 1,799,924

31. BASIC AND DILUTED EARNINGS PER SHARE

Profit after taxation 3,175,599 2,947,232

Weighted average number of ordinary shares 1,047,831 1,047,831

Basic and diluted earnings per share 3.03 2.81

Note

Number in ‘000

(Rupees)

32. FAIR VALUE MEASUREMENTS

The fair value of quoted securities other than investments in subsidiaries and those classified as held-to-maturity,is based on quoted market price. Quoted securities classified as held to maturity are carried at cost.

The fair value of unquoted debt securities, fixed term loans, other assets, other liabilities, fixed term deposits andborrowings cannot be calculated with sufficient reliability due to the absence of a current and active market forthese assets and liabilities and reliable data regarding market rates for similar instruments.

32.1 Fair value of financial assets

The Bank measures fair values using the following fair value hierarchy that reflects the significance of theinputs used in making the measurements:

Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assetsor liabilities.

Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that areobservable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: Fair value measurements using input for the assets or liabilities that are not based on observablemarket data (i.e. unobservable inputs).

Rupees in ‘000



The table below analyses financial instruments measured at the end of the reporting period by the level inthe fair value hierarchy into which the fair value measurement is categorised:


Fair valueLevel 1 Level 2 Level 3 Total

Rupees in ‘000

On balance sheet financial instruments

Financial assets measured at fair value- Investments

- Available-for-sale securitiesFederal government securities 352,111,125 – 352,111,125 – 352,111,125Sukuk certificates and bonds 1,329,035 – 1,329,035 – 1,329,035Ordinary shares of listed companies 366,839 366,839 – – 366,839Mutual funds and REIT certificates 385,136 370,256 14,880 – 385,136Listed term finance certificates 3,110,793 – 3,110,793 – 3,110,793Unlisted term finance certificates 25,677 – 25,677 – 25,677

Financial assets not measured at fair value -disclosed but not measured at fair value

- Cash and balances with treasury banks 84,573,941 – – – –- Balances with other banks 1,621,024 – – – –- Lendings to financial institutions 21,148,260 – – – –- Investments

- Held-to-maturity securitiesFederal government securities 36,268,199 – – – – Certificates of investments 4,950,000 – – – –

- Available-for-sale securities Ordinary shares of unlisted companies 27,920 – – – –- Advances 272,914,633 – – – –- Other assets 44,012,893 – – – –

822,845,475 737,095 356,591,510 – 357,328,605

Off-balance sheet financial instrumentsmeasured at fair value

- Forward purchase of foreign exchange contracts 205,395,842 – 205,395,842 – 205,395,842

- Forward sale of foreign exchange contracts 128,988,404 – 128,988,404 – 128,988,404

Carrying /Notional value

31

32




Rupees in ‘000



- Available-for-sale securitiesFederal government securities 298,850,140 – 298,850,140 – 298,850,140Sukuk certificates and bonds 1,417,667 – 1,417,667 – 1,417,667Ordinary shares of listed companies 412,902 412,902 – – 412,902Mutual funds and REIT certificates 450,755 435,855 14,900 – 450,755Listed term finance certificates 3,357,258 – 3,357,258 – 3,357,258Unlisted term finance certificates 59,913 – 59,913 – 59,913

Financial assets not measuredat fair value

- Cash and balances with treasury banks 48,177,009 – – – –- Balances with other banks 1,115,557 – – – –- Lendings to financial institutions 11,984,795 – – – –- Investments- Held-to-maturity securities

Federal government securities 36,259,349 – – – –Certificates of investments 5,000,000


661,176,431 848,757 303,699,878 304,548,635

Off-balance sheet financialinstruments measured at fair value



Valuation techniques used in determination of fair valuation of financial instruments withinlevel 2.

Debt securities The fair value is determined using the prices / rates available onMutual Funds Association of Pakistan (MUFAP) / Reuters.

Forward contracts The fair values are derived using forward exchange rates applicableto their respective remaining maturities.

Mutual funds The fair value is determined based on the net asset values publishedat the close of each business day.

33

Profit & LossNet mark-up / return / profit 15,304,292 (10,153,225) 3,454,462 8,605,529Inter segment revenue - net (11,264,033) 10,690,727 573,306 –Non mark-up / return / interest income (936,389) 165,785 4,085,941 3,315,337

Total income 3,103,870 703,287 8,113,709 11,920,866Segment direct expenses (119,845) (193,320) (1,852,971) (2,166,136)Inter segment expense allocation (2,137,513) (251,219) (1,773,723) (4,162,455)

Total expenses (2,257,358) (444,539) (3,626,694) (6,328,591)Provisions (31,720) 1,202 137,375 106,857

Profit before tax 814,792 259,950 4,624,390 5,699,132

Balance SheetCash & bank balances 1,147,241 47,179,260 37,868,464 86,194,965Investments 399,404,724 – – 399,404,724Lendings to financial institutions 21,148,260 – – 21,148,260Advances - performing – 3,412,664 269,103,696 272,516,360Advances - non-performing – 7,633 16,806,362 16,813,995Provision against advances – (12,975) (16,402,747) (16,415,722)Net inter segment lending – 284,200,661 – 284,200,661Others 9,153,108 50,929 50,016,802 59,220,839

Total assets 430,853,333 334,838,172 357,392,577 1,123,084,082

Borrowings 109,604,793 – 41,069,232 150,674,025Subordinated debt – – – –Deposits & other accounts – 330,250,211 261,759,113 592,009,324Net inter segment borrowing 283,557,717 – 642,944 284,200,661Others 147,511 4,587,961 53,921,288 58,656,760

Total liabilities 393,310,021 334,838,172 357,392,577 1,085,540,770Equity 37,543,312 – – 37,543,312

Total equity & liabilities 430,853,333 334,838,172 357,392,577 1,123,084,082

Contingencies & commitments 328,079,236 – 168,190,064 496,269,300

TotalTrade &Sales

RetailBanking

CommercialBanking


Rupees in ‘000

33. SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES

34

Profit & LossNet mark-up / return / profit 11,549,513 (1,421,635) (2,343,976) 7,783,902Inter segment revenue - net (9,661,136) 2,065,473 7,595,663 –Non mark-up / return / interest income (175,114) 105,411 3,197,417 3,127,714


Total expenses (2,338,888) (109,258) (3,287,177) (5,735,323)Provisions (24,481) (3,300) (401,356) (429,137)

Profit before tax (650,106) 636,691 4,760,571 4,747,156

TotalTrade &Sales

RetailBanking

CommercialBanking


Rupees in ‘000

Balance SheetCash & bank balances 907,449 24,672,447 23,712,670 49,292,566Investments 346,665,904 – – 346,665,904Lendings to financial institutions 11,984,795 – – 11,984,795Advances - performing – 3,167,829 222,402,571 225,570,400Advances - non-performing – 6,649 17,673,258 17,679,907Provision against advances – (11,773) (16,548,917) (16,560,690)Net inter segment lending – 254,934,343 57,085,986 312,020,329Others 12,529,588 52,983 26,180,328 38,762,899

Total assets 372,087,736 282,822,478 330,505,896 985,416,110

Borrowings 19,457,589 – 31,889,792 51,347,381Subordinated debt – – – –Deposits & other accounts – 279,208,331 264,369,179 543,577,510Net inter segment borrowing 312,020,329 – – 312,020,329Others 3,607,862 3,614,147 34,246,925 41,468,934

Total liabilities 335,085,780 282,822,478 330,505,896 948,414,154Equity 37,001,956 – – 37,001,956

Total equity & liabilities 372,087,736 282,822,478 330,505,896 985,416,110



35

Balances with other banksIn current accounts 157,116 – 64,260 – – – 221,376

InvestmentsOpening balance – 5,830,000 – – – – 5,830,000Investment made during the period – 9,850,000 – – – – 9,850,000Investment redeemed / disposed off during the period – (9,900,000) – – – – (9,900,000)Closing balance – 5,780,000 – – – – 5,780,000

AdvancesOpening balance – 31,606 2,787,011 115,507 – – 2,934,124Addition during the period – – 12,793,313 68,751 – – 12,862,064Repaid during the period – (31,606) (12,249,542) (8,113) – – (12,289,261)Closing balance – – 3,330,782 176,145 – – 3,506,927

Other assetsMark-up / return / interest accrued – 74,553 14,692 – – – 89,245Prepayments / advance deposits / other receivable – – 13,562 – – – 13,562

– 74,553 28,254 – – – 102,807BorrowingsOpening balance 8,823 – – – – – 8,823Borrowings during the period 1,489 – – – – – 1,489Settled during the period (8,823) – – – – – (8,823)Closing balance 1,489 – – – – – 1,489

DepositsOpening balance 396,056 972,640 16,227,022 163,874 731,175 3,661,606 22,152,373Received during the period 6,567,482 62,950,572 881,195,546 1,375,638 1,687,237 4,825,231 958,601,706Withdrawn during the period (6,496,125) (63,422,807) (881,549,771) (1,169,296) (1,574,963) (4,971,030) (959,183,992)Closing balance 467,413 500,405 15,872,797 370,216 843,449 3,515,807 21,570,087

Other liabilitiesMark-up / return / interest payable – 3,425 366,957 2,121 5,369 724,852 1,102,724Management fee payable for technical and consultancy services* 163,731 – – – – – 163,731Other payables – – 7,873 – – 259,297 267,170

163,731 3,425 374,830 2,121 5,369 984,149 1,533,625

Contingencies & commitmentsTransaction-related contingent liabilities – – 8,183,769 – – – 8,183,769Trade-related contingent liabilities – – 355,802 – – – 355,802Commitment against operating leases – 2,573 – – – – 2,573

– 2,573 8,539,571 – – – 8,542,144

34. TRANSACTIONS WITH RELATED PARTIESThe Bank has related party relationships with its holding company, subsidiaries, associates, companies with common directorship,key management personnel, directors and employees' retirement benefit plans.

Contributions in respect of charge for employees' retirement benefits are made in accordance with actuarial valuation and terms ofcontribution plan. Salaries & allowances of the key management personnel are in accordance with the terms of their employment.Other transactions are at agreed terms.

Holdingcompany

Subsidiaries Associates Keymanagement

personnel

Retirementbenefitplans

Total

Rupees in ‘000


Directors

* Management fee is as per the agreement with the holding company.

36

Balances with other banksIn current accounts 112,023 – 44,688 – – – 156,711

InvestmentsOpening balance – 2,780,000 – – – – 2,780,000Investment made during the year – 13,900,000 – – – – 13,900,000Investment redeemed / disposed off during the year – (10,850,000) – – – – (10,850,000)Closing balance – 5,830,000 – – – – 5,830,000

AdvancesOpening balance – – 1,702,532 172,585 – – 1,875,117Addition during the year – 3,095,593 74,680,329 47,080 – – 77,823,002Repaid during the year – (3,063,987) (73,595,850) (104,158) – – (76,763,995)Closing balance – 31,606 2,787,011 115,507 – – 2,934,124

Other assetsMark-up / return / interest accrued – 67,610 17,113 – – – 84,723Prepayments / advance deposits / other receivable – – 6,293 – – – 6,293

– 67,610 23,406 – – – 91,016BorrowingsOpening balance – – – – – – –Borrowings during the year 8,823 – – – – – 8,823Settled during the year – – – – – – –Closing balance 8,823 – – – – – 8,823

DepositsOpening balance 731,705 1,081,972 21,085,764 168,539 675,958 2,379,959 26,123,897Received during the year 8,548,305 116,852,558 1,648,137,753 600,685 2,393,366 6,066,469 1,782,599,136Withdrawn during the year (8,883,954) (116,961,890) (1,652,996,495) (605,350) (2,338,149) (4,784,822) (1,786,570,660)Closing balance 396,056 972,640 16,227,022 163,874 731,175 3,661,606 22,152,373

Other liabilitiesMark-up / return / interest payable – 3,109 352,252 1,295 3,205 632,664 992,525Management fee payable for technical and consultancy services* 115,344 – – – – – 115,344Other payables – – 6,391 – – 199,072 205,463

115,344 3,109 358,643 1,295 3,205 831,736 1,313,332

Contingencies & commitmentsTransaction-related contingent liabilities – – 7,531,999 – – – 7,531,999Trade-related contingent liabilities – – 1,999,428 – – – 1,999,428Commitment against operating leases – 11,144 – – – – 11,144

– 11,144 9,531,427 – – – 9,542,571

Holdingcompany

Subsidiaries Associates Keymanagement

personnel


Total

Rupees in ‘000


Directors


37

Transactions during the period

Associates Retirementbenefitplans

Subsidiaries Total

For the half year ended 30 June 2019 (Un-Audited)

Rupees in ‘000

DirectorsKeymanagement

personnel

Holdingcompany


Income

Mark-up / return / interest earned – 234,601 71,462 5,051 – – 311,114

Fee and commission income 2,437 914 108,329 – 20 – 111,700

Rent income 2,808 2,120 – – – – 4,928

Expense

Mark-up / return / interest expensed – 20,324 746,672 11,755 32,030 211,763 1,022,544

Commission / brokerage / bankcharges paid 273 295 613 – – – 1,181

Salaries and allowances – – – 252,000 – – 252,000

Directors' fees and allowances – – – – 5,698 – 5,698

Charge to defined benefit plan – – – – – 85,486 85,486

Contribution to definedcontribution plan – – – – – 96,826 96,826

Operating lease rentals / rent expenses – 7,841 6,963 – – – 14,804

Insurance premium expenses – – 6,328 – – – 6,328

Maintenance, electricity,stationery & entertainmentexpenses – – 45,075 – – – 45,075

Management fee expense fortechnical and consultancyservices * 202,554 – – – – – 202,554

Donation – – 7,960 – – – 7,960

Professional / other charges – – 1,564 – – – 1,564

38



Subsidiaries Total


Rupees in ‘000


personnel

Holdingcompany


Income

Mark-up / return / interest earned – 69,231 26,544 3,653 – – 99,428

Fee and commission income 3,562 157 81,013 – 14 – 84,746

Rent income 2,808 2,955 – – – – 5,763

Expenses

Mark-up / return / interest expensed – 12,846 520,930 3,780 15,667 122,526 675,749

Commission / brokerage / bankcharges paid 632 – 599 – – – 1,231

Salaries and allowances – – – 156,539 – – 156,539

Directors' fees and allowances – – – – 6,648 – 6,648

Charge to defined benefit plan – – – – – 73,839 73,839

Contribution to definedcontribution plan – – – – – 89,756 89,756

Operating lease rentals / rent expenses – 15,582 6,533 – – – 22,115

Insurance premium expenses – – 5,738 – – – 5,738

Maintenance, electricity,stationery & entertainmentexpenses – – 36,278 – – – 36,278

Management fee expense fortechnical and consultancyservices * 174,791 – – – – – 174,791

Donation – – 11,738 – – – 11,738

39

2018

Minimum Capital Requirement (MCR):Paid-up capital (net of losses) 10,478,315 10,478,315

Capital Adequacy Ratio (CAR):Eligible Common Equity Tier 1 (CET 1) capital 34,909,214 34,037,880Eligible Additional Tier 1 (ADT 1) capital – –

Total eligible tier 1 capital 34,909,214 34,037,880Eligible tier 2 capital 1,384,053 976,755

Total eligible capital (tier 1 + tier 2) 36,293,267 35,014,635

Risk Weighted Assets (RWAs):Credit risk 263,387,704 229,288,756Market risk 1,248,501 1,571,342Operational risk 36,087,611 36,087,611

Total 300,723,816 266,947,709

CET 1 capital adequacy ratio 11.61% 12.75%

Tier 1 capital adequacy ratio 11.61% 12.75%

Total capital adequacy ratio 12.07% 13.12%

Minimum capital requirements prescribed by SBPCommon equity tier 1 capital adequacy ratio 6.00% 6.00%Tier 1 capital adequacy ratio 7.50% 7.50%Total capital adequacy ratio 11.90% 11.90%

The Bank uses simple, maturity method and basic indicator approach for credit risk, market risk and operational riskexposures respectively in the capital adequacy calculation.

Leverage Ratio (LR):Eligible tier-1 capital 34,909,214 34,037,880Total exposures 1,002,356,206 825,364,543Leverage ratio 3.48% 4.12%

Liquidity Coverage Ratio (LCR):Total high quality liquid assets 317,868,861 317,763,854Total net cash outflow 165,801,020 125,849,179Liquidity coverage ratio 192% 252%

Net Stable Funding Ratio (NSFR):Total available stable funding 492,177,894 440,145,855Total required stable funding 282,882,251 216,434,904Net stable funding ratio 174% 203%

Rupees in ‘000

30 June2019


31 December

35. CAPITAL ADEQUACY, LEVERAGE RATIO & LIQUIDITY REQUIREMENTS

40

Rupees in ‘000

36. ISLAMIC BANKING BUSINESSThe Bank is operating 31 (31 December 2018: 31) islamic banking branches and 219 (31 December 2018: 216) islamicbanking windows at the end of the period / year.

Note2018

30 June2019

31 December


ASSETSCash and balances with treasury banks 3,343,631 3,340,608Balances with other banks – –Due from financial institutions 36.1 17,154,371 1,000,000Investments 36.2 9,887,722 21,312,705Islamic financing and related assets - net 36.3 21,051,009 17,715,168Fixed assets 36.4 568,197 82,121Intangible assets – –Due from head office 1,241,435 1,056,134Other assets 2,026,938 1,605,849

Total assets 55,273,303 46,112,585

LIABILITIESBills payable 579,265 657,934Due to financial institutions 2,779,895 1,864,574Deposits and other accounts 36.5 46,474,756 38,684,214Due to head office – –Subordinated debt – –Other liabilities 36.4 1,813,191 1,473,908

51,647,107 42,680,630

NET ASSETS 3,626,196 3,431,955

REPRESENTED BYIslamic banking fund 3,004,001 3,003,472Reserves – –Surplus / (deficit) on revaluation of assets 10,266 (17,981)Unappropriated profit 36.9 611,929 446,464

3,626,196 3,431,955CONTINGENCIES AND COMMITMENTS 36.6

41

The profit and loss account of the Bank's islamic banking branches for the period ended 30 June 2019 is as follows:

Note

36.1 Due from financial institutions

In localcurrency


In foreigncurrency

Total


Rupees in ‘000UnsecuredMusharaka 4,500,000 – 4,500,000 1,000,000 – 1,000,000Bai-muajjal receivable

from State Bankof Pakistan 12,654,371 – 12,654,371 – – –

17,154,371 – 17,154,371 1,000,000 – 1,000,000

In foreigncurrency

Profit / return earned 36.7 2,233,982 1,269,522Profit / return expensed 36.8 (1,391,970) (855,760)

Net profit / return 842,012 413,762

Other income

Fee and commission income 72,800 68,018Dividend income – –Foreign exchange income 19,146 13,311Income / (loss) from derivatives – –Gain / (loss) on securities 415 (22)Other income 10,467 8,238

Total other income 102,828 89,545

Total income 944,840 503,307

Other expenses

Operating expenses 332,699 292,201Workers welfare fund – –Other charges 85 107

Total other expenses 332,784 292,308

Profit / (loss) before provisions 612,056 210,999Provisions and write offs - net (127) (9,150)

Profit / (loss) before taxation 611,929 201,849

Rupees in ‘000



42


Rupees in ‘000

Cost /amortised

cost

Provisionfor

diminution

Surplus /(deficit)

36.2 Investments by segments:

Carryingvalue

Cost /amortised

cost

Provisionfor

diminution

Surplus /(deficit)

Carryingvalue

Rupees in ‘000

30 June2019


31 December2018

Federal government securities:

– Ijarah sukuks – – – – 11,313,145 – (26,794) 11,286,351– Bai-muajjal 3,608,688 – – 3,608,688 3,608,688 – – 3,608,688

3,608,688 – – 3,608,688 14,921,833 – (26,794) 14,895,039Non government debt securities– Listed 5,469,285 – 4,334 5,473,619 5,537,142 – 3,805 5,540,947– Unlisted 799,483 – 5,932 805,415 871,711 – 5,008 876,719

6,268,768 – 10,266 6,279,034 6,408,853 – 8,813 6,417,666Total investments 9,877,456 – 10,266 9,887,722 21,330,686 – (17,981) 21,312,705

36.3 Islamic financing and related assets - net

Ijarah 375,998 398,097Murabaha 5,971,349 5,906,879Working capital musharaka 3,325,244 2,533,380Diminishing musharaka 4,032,551 3,532,275Istisna 707,659 1,029,204Export refinance murabaha 452,709 497,902Export refinance istisna 663,759 923,713Al-bai financing 481,071 316,194Advances against:

Ijarah 164,578 123,988Murabaha 831,656 349,302Diminishing musharaka 1,203,926 596,470Istisna 1,301,164 1,064,759Export refinance murabaha 62,648 127,507Export refinance istisna 1,319,540 326,288

Inventory related toAl-bai goods 381,141 240,116Istisna goods 194,638 167,589

Gross islamic financing and related assets 21,469,631 18,133,663Provision against non-performing islamic financing (418,622) (418,495)Islamic financing and related assets - net of provision 21,051,009 17,715,168

43

Rupees in ‘000

30 June2019


31 December2018

36.4 Fixed assets and other liabilities

At 30 June 2019, fixed asset included right-of-use assets of Rs. 514,220 thousand and other liabilities includedrelated lease liability of Rs. 510,956 thousand more fully explained in note 3.2.1.

36.5 Deposits

CustomersCurrent deposits 10,699,451 8,363,646Savings deposits 17,988,564 18,287,455Term deposits 10,400,920 10,834,638

39,088,935 37,485,739Financial InstitutionsCurrent deposits 12,072 2,054Savings deposits 848,749 756,421Term deposits 6,525,000 440,000

7,385,821 1,198,47546,474,756 38,684,214

36.6 Contingencies and commitmentsGuarantees 1,149,819 1,893,613Commitments 3,335,895 3,362,786

4,485,714 5,256,399

36.7 Profit / return earned on financing, investments and placementProfit earned on:Financing 883,347 438,479Investments 934,253 711,871Placements 416,382 119,172

2,233,982 1,269,52236.8 Profit on deposits and other dues expensed

Deposits and other accounts 1,328,808 837,354Due to financial institutions 28,491 18,406Discount expense on lease liability against right-of-use assets 34,671 –

1,391,970 855,760

Rupees in ‘000



37. GENERAL

37.1 The figures have been rounded off to nearest thousand rupees, unless otherwise stated.

37.2 Corresponding figures have been re-classified, re-arranged or additionally incorporated in these unconsolidatedcondensed interim financial statements wherever necessary to facilitate comparison and better presentationin accordance with the revised forms of quarterly financial statements of the Banks' issued by the SBP throughits BPRD Circular letter No. 05 of 2019. Further, incremental depreciation on surplus arising on revaluation ofnon-banking assets of Rs. 1,424 thousand (30 June 2018 : Rs. 1,424 thousand) earlier included in statementof comprehensive income has been included directly in the statement of changes in equity for a moreappropriate presentation.

38. DATE OF AUTHORISATION FOR ISSUE

These unconsolidated condensed interim financial statements were authorised for issue on 22 August 2019 by theBoard of Directors of the Bank.

44

Rupees in ‘000

30 June2019


31 December2018

36.9 Unappropriated profitOpening balance 446,464 283,058Add: Islamic banking profit for the period 611,929 446,464Less: Transferred to head office (446,464) (283,058)Closing balance 611,929 446,464



Consolidated Accounts for the half yearand quarter ended 30 June 2019

(Un-audited)

46

CONSOLIDATED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION

30 June

(Un-Audited)

31 December2018

(Audited)

Note

Rupees in ‘000

AS AT 30 JUNE 2019

2019

ASSETS

Cash and balances with treasury banks 6 84,573,961 48,177,307Balances with other banks 7 2,497,935 1,916,548Lendings to financial institutions 8 21,148,260 11,984,795Investments 9 394,061,389 341,284,168Advances 10 282,830,487 236,112,844Fixed assets 11 7,652,595 3,947,862Intangible assets 12 111,143 163,645Deferred tax assets 13 5,758,401 5,821,468Other assets 14 46,092,456 29,430,741

844,726,627 678,839,378

LIABILITIES

Bills payable 15 14,363,746 12,173,407Borrowings 16 152,098,303 53,008,774Deposits and other accounts 17 591,722,296 542,839,457Liabilities against assets subject to finance lease – –Sub-ordinated debts – –Deferred tax liabilities – –Other liabilities 18 45,372,276 30,365,390

803,556,621 638,387,028NET ASSETS 41,170,006 40,452,350

REPRESENTED BY

Share capital 10,478,315 10,478,315Reserves 17,006,548 16,371,428(Deficit) / surplus on revaluation of assets - net of tax 19 (6,120,154) (5,562,129)Unappropriated profit 16,438,390 15,950,329

37,803,099 37,237,943Non-controlling interest 3,366,907 3,214,407

41,170,006 40,452,350CONTINGENCIES AND COMMITMENTS 20

The annexed notes 1 to 38 form an integral part of these consolidated condensed interim financial statements.



47

Mark-up / return / interest earned 22 16,853,190 31,019,780 10,103,963 20,031,259Mark-up / return / interest expensed 23 (12,609,630) (22,147,026) (5,927,378) (12,054,819)

Net mark-up / interest income 4,243,560 8,872,754 4,176,585 7,976,440

NON MARK-UP / INTEREST INCOME

Fee and commission income 24 1,257,604 2,451,050 946,474 1,879,197Dividend income 21,332 45,839 41,441 50,790Foreign exchange income 901,088 1,358,716 468,598 739,575Income / (loss) from derivatives – – – –Gain / (loss) on securities 25 (730,259) (719,681) 63,749 81,959Other income 26 98,859 210,506 83,266 403,913Total non-mark-up / interest income 1,548,624 3,346,430 1,603,528 3,155,434Total Income 5,792,184 12,219,184 5,780,113 11,131,874

NON MARK-UP / INTEREST EXPENSES

Operating expenses 27 3,130,305 6,280,949 2,927,588 5,707,705Workers welfare fund 51,847 113,676 49,520 98,980Other charges 28 40,581 41,295 14,644 14,802

Total non-mark-up / interest expenses (3,222,733) (6,435,920) (2,991,752) (5,821,487)

Profit before provisions 2,569,451 5,783,264 2,788,361 5,310,387

(Provisions) / reversal and write offs - net 29 240,485 106,857 (331,711) (429,132)Extra ordinary / unusual items – – – –

PROFIT BEFORE TAXATION 2,809,936 5,890,121 2,456,650 4,881,255

Taxation 30 (1,053,705) (2,530,380) (1,020,450) (1,807,360)

PROFIT AFTER TAXATION 1,756,231 3,359,741 1,436,200 3,073,895

PROFIT ATTRIBUTABLE TO:

Equity shareholders of the holding company 1,680,570 3,201,002 1,378,556 2,954,726Non-controlling interest 75,661 158,739 57,644 119,169

1,756,231 3,359,741 1,436,200 3,073,895

Basic and diluted earnings per share 31 1.60 3.05 1.32 2.82

CONSOLIDATED CONDENSED INTERIMPROFIT AND LOSS ACCOUNT (UN-AUDITED)

FOR THE QUARTER AND HALF YEAR ENDED 30 JUNE 2019

Quarterended

Rupees in ‘000

Half yearended


Half yearended

Note 30 June 2018

Rupees




48

CONSOLIDATED CONDENSED INTERIM

FOR THE QUARTER AND HALF YEAR ENDED 30 JUNE 2019STATEMENT OF COMPREHENSIVE INCOME (UN-AUDITED)


Profit after taxation 1,756,231 3,359,741 1,436,200 3,073,895

Other comprehensive income

Items that may be reclassified to profit and lossin subsequent periods:

Movement in (deficit) on revaluation ofinvestments - net of tax (1,114,405) (562,840) (574,496) (1,798,513)

Items that will not be reclassified to profit and lossin subsequent periods:

Remeasurement (loss) / gain on defined benefitobligations - net of tax (2,460) 16,418 (26,818) (15,472)

Total comprehensive income 639,366 2,813,319 834,886 1,259,910

Equity share holders of the holding company 581,369 2,660,819 783,481 1,165,309Non-controlling interest 57,997 152,500 51,405 94,601

639,366 2,813,319 834,886 1,259,910

Quarterended

Rupees in ‘000

Half yearended


Half yearended

30 June 2018



49

FOR THE HALF YEAR ENDED 30 JUNE 2019

Statutoryreserve

Specialreserve

Revenuereserve Investments

Non-banking

assets

Un-appropriated

profit

Rupees in ‘000

Reserves

TotalSharepremium

Sharecapital

Surplus / (deficit) onrevaluation


CONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY (UN-AUDITED)

Sub-total

Non-controlling

interest

Balance as at 1 January 2018 10,478,315 2,550,985 10,832,685 240,361 1,500,000 778,330 182,331 14,159,430 40,722,437 3,140,212 43,862,649Profit after taxation – – – – – – – 2,954,726 2,954,726 119,169 3,073,895Other comprehensive income - net of tax – – – – – (1,703,912) – (15,472) (1,719,384) (94,601) (1,813,985)Total comprehensive income for the period – – – – – (1,703,912) – 2,939,254 1,235,342 24,568 1,259,910Transfer to statutory reserve – – 589,446 – – – – (589,446) – – –Transfer from surplus on

revaluation of assets tounappropriated profit - net of tax – – – – – – (1,424) 1,424 – – –


Cash dividend (Rs. 3.00 pershare) for the year ended31 December 2017 – – – – – – – (3,143,494) (3,143,494) – (3,143,494)

Balance as at 30 June 2018 10,478,315 2,550,985 11,422,131 240,361 1,500,000 (925,582) 180,907 13,367,168 38,814,285 3,164,780 41,979,065Profit after taxation – – – – – – – 3,225,051 3,225,051 121,959 3,347,010Other comprehensive income - net of tax – – – – – (4,816,008) – 14,615 (4,801,393) 155,368 (4,646,025)Total comprehensive income for the period – – – – – (4,816,008) – 3,239,666 (1,576,342) 277,327 (1,299,015)Transfer to statutory reserve – – 657,951 – – – – (657,951) – – –Transfer from surplus on

revaluation of assets tounappropriated profit - net of tax – – – – – – (1,446) 1,446 – – –


Profit distribution by First HabibModaraba (Rs. 1.25 per certificate)for the period ended 30 June 2018 – – – – – – – – – (226,800) (226,800)

Profit distribution by Habib MetropolitanModaraba (Rs. 0.10 per certificate)for the period ended 30 June 2018 – – – – – – – – – (900) (900)

Balance as at 31 December 2018 10,478,315 2,550,985 12,080,082 240,361 1,500,000 (5,741,590) 179,461 15,950,329 37,237,943 3,214,407 40,452,350Profit after taxation – – – – – – – 3,201,002 3,201,002 158,739 3,359,741Other comprehensive income - net of tax – – – – – (556,601) – 16,418 (540,183) (6,239) (546,422)Total comprehensive income for the period – – – – – (556,601) – 3,217,420 2,660,819 152,500 2,813,319Transfer to statutory reserve – – 635,120 – – – – (635,120) – – –Transfer from surplus on revaluation

of assets to unappropriated profit- net of tax – – – – – – (1,424) 1,424 – – –


Cash dividend (Rs. 2.00 per share) forthe year ended 31 December 2018 – – – – – – – (2,095,663) (2,095,663) – (2,095,663)

Balance as at 30 June 2019 10,478,315 2,550,985 12,715,202 240,361 1,500,000 (6,298,191) 178,037 16,438,390 37,803,099 3,366,907 41,170,006



50

CONSOLIDATED CONDENSED INTERIM CASH FLOW STATEMENT (UN-AUDITED)FOR THE HALF YEAR ENDED 30 JUNE 2019


CASH FLOWS FROM OPERATING ACTIVITIESProfit before taxation 5,890,121 4,881,255Less: Dividend income (45,839) (50,790)

5,844,282 4,830,465Adjustments

Depreciation on operating fixed assets 478,948 403,876Depreciation on right-of-use assets 354,141 –Depreciation on non-banking assets 5,577 6,377Amortization 59,922 62,433Mark-up / return / interest expensed on lease liability against right-of-use assets 228,766 –Provisions and write offs excluding recovery of written off bad debts 29 (103,327) 476,981Net gain on sale of fixed assets (9,526) (866)Net gain on sale of non-banking assets 26 – (202,282)Net gain on sale of non-current assets held-for-sale 26 – (35,042)Provision against workers welfare fund 113,676 97,666Provision against compensated absences 26,708 37,620Provision against defined benefit plan 86,769 74,551

1,241,654 921,3147,085,936 5,751,779

(Increase) / decrease in operating assetsLendings to financial institutions (9,163,465) 1,129,755Advances (46,582,596) (17,792,223)Other assets (excluding current taxation and including non-banking assets) (15,201,995) (1,057,873)

(70,948,056) (17,720,341)Increase / (decrease) in operating liabilities

Bills payable 2,190,339 (6,373,176)Borrowings from financial institutions 97,649,333 8,957,116Deposits and other accounts 48,882,839 13,113,397Other liabilities (excluding current taxation) 9,300,125 (1,301,145)

158,022,636 14,396,19294,160,516 2,427,630

Payment against compensated absences (16,347) (23,420)Contribution paid to defined benefit plan (3,040) (1,969)Income tax paid (2,559,449) (2,006,262)

Net cash flows from operating activities 91,581,680 395,979CASH FLOWS FROM INVESTING ACTIVITIES

Net investments in available-for-sale securities (53,661,776) 9,068,152Net investments in held-to-maturity securities (8,850) (19,429)Dividend received 16,172 49,664Investments in fixed assets 11.2 (746,848) (358,425)Investments in intangibles assets (7,420) (7,647)Proceeds from sale of fixed assets 14,443 10,985Proceeds from sale of non-banking assets – 600,000Proceeds from sale of non-current assets held-for-sale – 250,000

Net cash flows from investing activities (54,394,279) 9,593,300CASH FLOWS FROM FINANCING ACTIVITIES

Dividend paid (1,297,826) (3,116,266)Payment of lease against right-of-use assets (351,730) –

Net cash flows from financing activities (1,649,556) (3,116,266)Increase in cash and cash equivalents 35,537,845 6,873,013Cash and cash equivalents at beginning of the period 46,905,159 41,673,028Cash and cash equivalents at end of the period 82,443,004 48,546,041

30 June2019

30 June2018

Note

Rupees in ‘000



51

NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTSFOR THE HALF YEAR ENDED 30 JUNE 2019

1. STATUS AND NATURE OF BUSINESS

The Group comprises of Habib Metropolitan Bank Limited (the holding company), Habib Metropolitan FinancialServices Limited and Habib Metropolitan Modaraba Management Company (Private) Limited (wholly owned subsidiarycompanies) and First Habib Modaraba and Habib Metro Modaraba (Managed by Habib Metropolitan ModarabaManagement Company (Private) Limited).

Holding Company

Habib Metropolitan Bank Limited (the Bank) was incorporated in Pakistan on 3 August 1992, as a public limitedcompany, under the Companies Ordinance, 1984 (now Companies Act, 2017) and is engaged in commercial bankingand related services. Its shares are listed on the Pakistan Stock Exchange. The Bank operates 324 (31 December 2018:322) branches, including 31 (31 December 2018: 31) Islamic banking branches and 30 (31 December 2018: 30) subbranches in Pakistan. The Bank is a subsidiary of Habib Bank AG Zurich - Switzerland (the ultimate parent companywith 51% shares in the holding company) which is incorporated in Switzerland. The registered office of the holdingcompany is situated at Spencer's Building, I.I. Chundrigar Road, Karachi.

Subsidiary Companies

Habib Metropolitan Financial Services Limited - 100% holding

Habib Metropolitan Financial Services Limited was incorporated in Pakistan on 28 September 2007 as a public limitedcompany under the Companies Ordinance, 1984 (now Companies Act, 2017). The registered office of the subsidiarycompany is located at 1st Floor, GPC 2, Block 5, Khekashan Clifton, Karachi. The subsidiary company is a corporatemember of the Pakistan Stock Exchange Limited and engaged in equity brokerage services.

Habib Metropolitan Modaraba Management Company (Private) Limited - 100% holding

Habib Metropolitan Modaraba Management Company (Private) Limited (modaraba management company) wasincorporated in Pakistan on 01 June 2015 as a private limited under the Companies Ordinance, 1984 (now CompaniesAct, 2017) and Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980. The registered officeof the subsidiary company is located at 6th Floor, HBZ Plaza, I.I. Chundrigar Road, Karachi.

First Habib Modaraba - 10% holding

First Habib Modaraba is a perpetual, multi-purpose modaraba having its registered office at 6th Floor, HBZ Plaza,I.I. Chundrigar Road, Karachi. It is listed on the Pakistan Stock Exchange and engaged in the business of leasing (Ijarah),Musharaka, Murabaha financing and other related business.

Habib Metro Modaraba - 70% holding

Habib Metro Modaraba (HMM) which is a perpetual, multi-purpose modaraba having its registered office at 6thFloor, HBZ Plaza, I.I. Chundrigar Road, Karachi. HMM’s primary business activities are residual value car financing andprovision of finance for solar power solutions on the basis of Ijarah / rental / musharkah or any other approvedmodes of financing. The holding company and the modaraba management company own 60% and 10% of thecertificates of HMM respectively.

52

2. BASIS OF PRESENTATION

2.1 These consolidated condensed interim financial statements comprise the financial statements of the holdingcompany and its subsidiary companies. The financial statements of the subsidiary companies have beenprepared for the same reporting period as the holding company using consistent accounting policies.

2.2 Statement of Compliance

2.2.1These consolidated condensed interim financial statements have been prepared in accordance with theaccounting and reporting standards as applicable in Pakistan for interim financial reporting. The accountingand reporting standards as applicable in Pakistan for interim financial reporting comprise of:

– International Accounting Standard (IAS) 34 "Interim Financial Reporting" issued by the InternationalAccounting Standards Board (IASB) as notified under the Companies Act, 2017;

– Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered Accountants ofPakistan, as are notified under the Companies Act, 2017;

– Provisions of and directives issued under the Banking Companies Ordinance, 1962 and the CompaniesAct, 2017; and

– Directives issued by the State Bank of Pakistan and the Securities and Exchange Commission ofPakistan (SECP).

Whenever the requirements of the Banking Companies Ordinance, 1962, the Companies Act, 2017 orthe directives issued by the SBP and the SECP differ with the requirements of the IAS 34 or IFAS,requirements of the Banking Companies Ordinance, 1962, the Companies Act, 2017 and the said directivesshall prevail.

The SBP vide BSD Circular No. 10, dated 26 August 2002 has deferred the applicability of InternationalAccounting Standard (IAS) 39 "Financial Instruments: Recognition and Measurement" and IAS 40"Investment Property" for banking companies till further instructions. Further, according to a notificationof the Securities and Exchange Commission of Pakistan (SECP) through S.R.O. No. 411 (1) / 2008 dated28 April 2008, IFRS 7 "Financial Instruments: Disclosures" has not been made applicable for banks.Accordingly, the requirements of these standards have not been considered in the preparation of theseconsolidated financial statements. However, investments have been classified and valued in accordancewith the requirements of various circulars issued by the SBP.

The Securities and Exchange Commission of Pakistan (SECP) has notified Islamic Financial AccountingStandard (IFAS) 3, 'Profit and Loss Sharing on Deposits' issued by the Institute of Chartered Accountantsof Pakistan. IFAS 3 shall be followed with effect from the financial periods beginning on or after 1 January2014 in respect of accounting for transactions relating to 'Profit and Loss Sharing on Deposits' as definedby the said standard. The standard has resulted in certain new disclosures in the financial statements ofBanks. The SBP through BPRD Circular Letter No. 4 dated 25 February 2015, has deferred the applicabilityof IFAS 3 till further instructions and prescribed the Banks to prepare their annual and periodical financialstatements as per existing prescribed formats.

2.2.2 The disclosures made in these consolidated condensed interim financial statements have been basedon a format prescribed by the SBP vide BPRD Circular Letter No. 5 dated 22 March 2019 and IAS 34,Interim Financial Reporting. They do not include all the disclosures required for annual financialstatements, and these consolidated condensed interim financial statements should be read inconjunction with the audited consolidated financial statements of the Group for the year ended31 December 2018.

53

3. SIGNIFICANT ACCOUNTING POLICY

The significant accounting policies and method of computation adopted in the preparation of these consolidatedcondensed interim financial statements are consistent with those applied in the preparation of the audited consolidatedfinancial statements of the Group for the year ended 31 December 2018 except for changes explained in note 3.1to these financial statements.

3.1 Amendments to approved accounting standards that are effective in the current period

3.1.1 IFRS 16 ‘Leases’ (effective for annual period beginning on or after 1 January 2019). The impact of adoptionof IFRS 16 is given in note 3.2 to these financial statements.

3.1.2 In addition, as mentioned in note 2.2.2 above, the disclosures and the presentations in the condensedinterim financial statements are on a format prescribed by the State Bank of Pakistan vide BPRD CircularLetter No. 5 dated 22 March 2019 and IAS 34, "Interim Financial Reporting". Earlier upto 30 June 2018,the disclosures and presentations were in accordance with the format prescribed by the State Bank ofPakistan vide BSD Circular Letter No. 2 dates 12 May 2004 and BPRD Circular Letter No. 5 dated 29 February2016 and IAS 34 "Interim Financial Reporting". However the adoption of the new format has only resultedin certain additional disclosures and presentations. Corresponding figures have also been so presented.

3.1.3 There are certain other new and amended standards, interpretations and amendments that are mandatoryfor the Group's accounting periods beginning on or after 1 January 2019 but are considered not to berelevant or do not have any significant effect on the Group's operations and therefore not detailed inthese consolidated condensed interim financial statements.

3.2 Adoption of International Financial Reporting Standards (IFRS) 16 - Leases

3.2.1 On 1 January 2019, the Group adopted IFRS 16 Leases. This IFRS has introduced a single lease accountingmodel and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12months, unless the underlying asset is of low value. A lessee is required to recognize a right-of use assetrepresenting its right to use the underlying leased asset and a lease liability representing its obligationto make lease payments. IFRS 16 substantially carries forward the lessor accounting requirements in IAS17 - Leases. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, andto account for these two types of leases differently.

The significant judgments in the implementation were determining if a contract contained a lease, andthe determination of whether the Group is reasonably certain that it will exercise extension optionspresent in lease contracts. The significant estimates were the determination of incremental borrowingrates. The weighted average discount rate applied to lease liabilities on the transition date 1 January2019 was 13.24 percent.

The impact of IFRS 16 on the Group is primarily where the Group is a lessee in property lease contracts.The Group has elected to adopt simplified approach on transition and has not restated comparativeinformation. On 1 January 2019, the Group recognized a lease liability, being the remaining lease payments,including extension options where renewal is reasonably certain, discounted using the Group’s incrementalborrowing rate at the date of initial application. The corresponding right-of-use asset recognized is theamount of the lease liability adjusted by prepaid or accrued lease payments related to those leases. Thebalance sheet has increased as a result of the recognition of lease liability and right-to-use assets as of1 January 2019 was Rs. 3,487,447 thousand with no adjustment to retained earnings. The asset is presentedin ‘Fixed Assets’ and the liability is presented in ‘Other liabilities’. Also in relation to those leases underIFRS 16, the Group has recognized depreciation and interest costs, instead of operating lease expenses.

54

The Group has elected not to recognize right-of-use assets and lease liabilities for some leases of lowvalue assets. The lease payments associated with these leases are recognized as an expenses on a straight-line basis over the lease term. The right-of-use assets are presented in the same line items as it presentsunderlying assets of the same nature that it owns.

Upto 31 December 2018, assets held under property leases, not equivalent to ownership rights, wereclassified as operating leases and were not recognized as asset in the statement of financial position.Payments or accruals under operating leases were recognised in profit and loss on a straight line basisover term of the lease.

The effect of this change in accounting policy is as follows:

Impact on Statement of Financial Position

Increase in fixed assets - right-of-use assets 3,441,752Decrease in other assets - advances, deposits, advance rent and other prepayments (215,683)Increase in other assets - advance taxation 53,981

3,280,050Increase in other liabilities - lease liability against right-of-use assets (3,364,483)

Decrease in net assets (84,433)

30 June2019

Rupees in ‘000

Impact on Profit and Loss account

Increase in mark-up expense - lease liability against right-of-use assets (228,766)(Increase) / decrease in administrative expenses:- Depreciation on right-of-use assets (354,141)- Rent expense 444,493

Decrease in profit before tax (138,414)Decrease in tax 53,981

Decrease in profit after tax (84,433)

Rupees in ‘000

Half yearended

30 June2019

55

3.2.2 In view of the application of above IFRS, the Group's accounting policy for right-of-use assets and itsrelated lease liability is as follow:

A contract is, or contains a lease if the contract conveys a right to control the use of an identified assetfor a period of time in exchange for consideration. The Group mainly leases properties for its operations.The Group recognizes a right-of-use asset and lease liability at the lease commencement date. Theright-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciationand impairment losses, and adjusted for certain remeasurements of the lease liability. The right-of-useasset is depreciated using the straight line method from the commencement date to the earlier of endof the useful life of right-of-use asset or end of the lease term. The estimated useful lives of assets aredetermined on the same basis as that for owned assets. In addition, the right-of-use asset is periodicallyreduced by impairment losses, if any.

The lease liability is initially measured at the present value of the lease payments that are not paid at thecommencement date, discounted using the interest rate implicit in the lease or, if that rate cannot bereadily determined, the Group’s incremental borrowing rate. The lease liability is subsequently increasedby the interest cost on the lease liability and decreased by lease payments made. It is re-measured whenthere is a change in future lease payments arising from a change in an index or rate, a change inassessment of whether extension option is reasonably certain to be exercised or a termination optionis reasonably certain not to be exercised.

3.3 Standards, interpretations of and amendments to accounting and reporting standards as applicable in Pakistanthat are not yet effective in the current year.

There are various standards, interpretations and amendments to accounting and reporting standards asapplicable in Pakistan that are not effective in the current year. These are not likely to have material effect onthe Group’s financial statements except for the following:

IFRS 9 ‘Financial Instruments’ and amendment – Prepayment Features with Negative Compensation (effectivefor annual periods beginning on or after 1 July 2018 and 1 January 2019 respectively). IFRS 9 replaces theexisting guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revisedguidance on the classification and measurement of financial instruments, a new expected credit loss modelfor calculating impairment on financial assets, and new general hedge accounting requirements. It also carriesforward the guidance on the recognition and derecognition of financial instruments from IAS 39. The Securitiesand Exchange Commission of Pakistan vide its notification dated 14 February 2019 modified the effective datefor implementation of IFRS 9 as ‘reporting period/ year ending on or after 30 June 2019 (earlier application ispermitted)’. State Bank of Pakistan has also informed the holding company that keeping in view theimplementation challenges of IFRS 9 and representations by the banking industry, it has been decided thatIFRS 9 is not applicable on the interim financials for the period ending 30 June 2019 for banks/DFIs/MFBs.Accordingly, the requirements of IFRS 9 have not been considered in the preparation of these financialstatements. The holding company is in the process of assessing the full impact of this standard.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The basis for accounting estimates adopted in the preparation of these consolidated condensed interim financialstatements are the same as that applied in the preparation of the audited consolidated financial statements for theyear ended 31 December 2018.

5. FINANCIAL RISK MANAGEMENT

The financial risk management objectives and policies adopted by the Group are consistent with those disclosed inthe audited consolidated financial statements for the year ended 31 December 2018.

56

Note

6. CASH AND BALANCES WITH TREASURY BANKS

In handLocal currency 11,975,485 7,657,684Foreign currencies 5,640,999 2,013,643

17,616,484 9,671,327

With State Bank of Pakistan in

Local currency current account 38,619,250 20,272,479Foreign currency current account 171,861 244,068Foreign currency deposit accounts – cash reserve account 4,988,664 4,151,971 – special cash reserve account 14,792,972 12,370,079

58,572,747 37,038,597

With National Bank of Pakistan in

Local currency current account 2,915,101 1,443,318

National Prize Bonds 5,469,629 24,065

84,573,961 48,177,307

7. BALANCES WITH OTHER BANKS

In PakistanIn current accounts 91,041 94,703In deposit accounts 1,259,652 1,008,359

1,350,693 1,103,062Outside Pakistan

In current accounts 1,147,242 813,4862,497,935 1,916,548

8. LENDINGS TO FINANCIAL INSTITUTIONS

Call money lendings – 3,000,000Repurchase agreement lendings (Reverse Repo) 2,993,889 4,184,795Bai-muajjal receivable with the State Bank of Pakistan 8.1 12,654,371 –Letter of placement 1,000,000 3,800,000Islamic placement - musharaka 8.2 4,500,000 1,000,000

21,148,260 11,984,795

8.1 These will mature upto 18 March 2020 and the maturity amount is Rs. 13,691,477 thousand.

8.2 These placements carrying rates ranging between 11.10% to 11.70% per annum with maturity upto 29 July 2019.

Rupees in ‘000

201930 June

(Un-Audited)2018

(Audited)

31 December

57


Rupees in ‘000

Cost /amortised

cost

Provisionfor

diminution

Surplus /(deficit)

9. INVESTMENTS

9.1 Investments by types

Carryingvalue

Cost /amortised

cost

Provisionfor

diminution

Surplus /(deficit)

Carryingvalue

Available-for-sale securities

Federal government securities 361,916,098 – (9,706,508) 352,209,590 307,914,359 – (8,965,828) 298,948,531

Shares 881,585 (307,280) 83,654 657,959 885,410 (273,810) 104,095 715,695

Non-government debt securities 4,695,596 (133,777) (21,314) 4,540,505 5,031,734 (138,428) 16,532 4,909,838

Mutual funds 417,571 (8,654) (23,781) 385,136 417,571 (5,753) 38,937 450,755

367,910,850 (449,711) (9,667,949) 357,793,190 314,249,074 (417,991) (8,806,264) 305,024,819

Held-to-maturity securities

Federal government securities 36,268,199 – – 36,268,199 36,259,349 – – 36,259,349

Non-government debt securities – – – – – – – –

36,268,199 – – 36,268,199 36,259,349 – – 36,259,349

Total Investments 404,179,049 (449,711) (9,667,949) 394,061,389 350,508,423 (417,991) (8,806,264) 341,284,168

Rupees in ‘000(Audited)

31 December2018

9.1.1 Investments given as collateral

Federal government securitiesMarket treasury bills 91,763,229 3,443,636Pakistan investment bonds 10,077,716 9,165,995

101,840,945 12,609,631

9.2 Provision for diminution in value of investments

9.2.1 Opening balance 417,991 537,372Charge for the period / year 36,370 100,021Reversal for the period / year (4,650) (14,442)Net charge for the period / year 31,720 85,579Reversal on disposal – (198,028)Investment written off – (6,932)Closing balance 449,711 417,991

30 June2019

(Un-Audited)

58

Rupees in ‘000

DomesticSubstandard – – – –Doubtful – – – –Loss 133,777 133,777 138,428 138,428

133,777 133,777 138,428 138,428


9.2.2 Particulars of provision against debt securities


Non-performinginvestments

Provision ProvisionNon-performinginvestments

Category of classification

Exposure amounting to Rs. 25,677 thousand (31 December 2018: Rs. 59,913 thousand) relating to termfinance certificates of Pakistan International Airlines Corporation Limited, which is governmentguaranteed script, has not been classified as non-performing investment as per the relaxation givenby the SBP.

9.3 The market value of securities classified as held-to-maturity is Rs. 31,985,798 thousand (31 December 2018:Rs. 32,847,389 thousand).

10. ADVANCES

Rupees in ‘000

30 June2019

(Un-Audited)

Performing31 December

2018(Audited)

Non-Performing Total30 June

2019(Un-Audited)

31 December2018

(Audited)

30 June2019

(Un-Audited)

31 December2018

(Audited)

Loans, cash credits, running finances, etc.In Pakistan 210,592,918 172,288,376 14,217,097 14,710,168 224,810,015 186,998,544

Islamic financing and related assets 10.1 30,944,288 27,084,790 441,197 503,972 31,385,485 27,588,762Bills discounted and purchased 40,895,008 35,620,461 2,155,701 2,465,767 43,050,709 38,086,228Advances - gross 282,432,214 234,993,627 16,813,995 17,679,907 299,246,209 252,673,534Provision against non-performing advances - specific – – (14,942,200) (15,324,500) (14,942,200) (15,324,500) - general (1,473,522) (1,236,190) – – (1,473,522) (1,236,190)

(1,473,522) (1,236,190) (14,942,200) (15,324,500) (16,415,722) (16,560,690)Advances - net of provisions 280,958,692 233,757,437 1,871,795 2,355,407 282,830,487 236,112,844

Note

10.1 It includes loans and advances of First Habib Modaraba and Habib Metro Modaraba amounting to Rs. 9,718,947thousand and Rs. 196,907 thousand respectively. Furthermore, it includes the Islamic banking operations ofthe holding company amounting to Rs. 21,469,631 thousand as disclosed in note 36.3 to these consolidatedcondensed interim financial statements.

10.2 Particulars of advances - gross

Rupees in ‘000

In local currency 271,385,525 223,055,631In foreign currencies 27,860,684 29,617,903

299,246,209 252,673,534

30 June2019

(Un-Audited)

31 December2018

(Audited)

59

Category of classificationDomestic

Rupees in ‘000

30 June 2019 (Un-Audited)Non-

performingloans

31 December 2018 (Audited)Non-

performingloans

Provision

10.3 Advances include Rs. 16,813,995 thousand (31 December 2018: Rs. 17,679,907 thousand) which have beenplaced under non-performing status as detailed below:

Provision

Substandard 179,179 22,740 259,378 17,562Doubtful 335,609 58,817 127,952 2,136Loss 16,299,207 14,860,643 17,292,577 15,304,802

16,813,995 14,942,200 17,679,907 15,324,500

10.4 Particulars of provision against advances



Rupees in ‘000

In local currency 14,509,486 1,473,522 15,983,008 14,952,295 1,236,190 16,188,485In foreign currencies 432,714 – 432,714 372,205 – 372,205

14,942,200 1,473,522 16,415,722 15,324,500 1,236,190 16,560,690



Rupees in ‘000

10.3.1 Exposure amounting to Rs. 5,302,737 thousand relating to certain facilities of Power Holding (Private) Limited,has not been classified as non-performing as the SBP has allowed a relaxation from Regulation - 8 of thePrudential Regulation. The above exposure is fully guranteed by the Government of Pakistan and does notrequired any provision.

Opening balance 15,324,500 1,236,190 16,560,690 16,168,582 257,841 16,426,423Charge for the year 507,537 237,332 744,869 936,036 978,349 1,914,385Reversals (879,916) – (879,916) (1,482,574) – (1,482,574)Net charge / (reversal) for the year (372,379) 237,332 (135,047) (546,538) 978,349 431,811Amount written off (9,921) – (9,921) (297,544) – (297,544)Closing balance 14,942,200 1,473,522 16,415,722 15,324,500 1,236,190 16,560,690

10.4.1 General provision includes provision of Rs. 6,226 thousand (31 December 2018: Rs. 5,134 thousand) madeagainst consumer portfolio and Rs. 95 thousand (31 December 2018: Rs. 35 thousand) made against smallenterprises (SEs) portfolio as required by the Prudential Regulation issued by the SBP.

10.4.2 Particulars of provision against advances

60

10.4.3 Consideration of forced sales value (FSV) for the purposes of provisioning against non-performing loansDuring the current period, the holding company availed additional forced sale value (FSV) benefit underBSD Circular No. 1 of 21 October 2011. This has resulted in reduction of provision against non-performingloans and advances by Rs. 93,551 thousand (31 December 2018: 628,190 thousand). Further, as of 30June 2019, had the benefit of FSVs (including those availed into previous years) not been taken by theholding company, the specific provision against non-performing advances would have been higher byRs. 1,569,606 thousand (31 December 2018: Rs. 2,096,898 thousand) and accumulated profit would havebeen lower by Rs. 1,020,244 thousand (31 December 2018: Rs. 1,362,983 thousand). This amount ofRs. 1,020,244 thousand (31 December 2018: Rs. 1,362,983 thousand) is not available for distribution ofcash and stock dividend to the shareholders and bonus to employees.

Note

Rupees in ‘000

30 June2019


31 December2018

11.2 Additions to fixed assetsThe following additions have been made to fixed assets during the period:Capital work-in-progress (transfer to fixed assets) / additions - net (23,999) 83,525

Property and equipmentBuilding on leasehold land 149,102 –Furniture and fixture 30,124 24,219Electrical office and computer equipment 460,452 180,264Vehicles 32,936 35,863Lease hold improvement 98,233 34,554

770,847 274,900Total 746,848 358,425

11.3 Disposal of fixed assetsThe net book value of fixed assets disposed off during the period is as follows:Furniture and fixture 40 89Electrical office and computer equipment 457 1,191Vehicles 4,420 6,553Lease hold improvement – 2,286Total 4,917 10,119

11. FIXED ASSETSCapital work-in-progress 11.1 118,461 142,460Property and equipment 4,092,382 3,805,402Right-of-use assets 3.2.1 3,441,752 –

7,652,595 3,947,86211.1 Capital work-in-progress

Civil works 81,691 22,739Equipment 31,950 110,420Advance to suppliers 4,820 9,301

118,461 142,460

Rupees in ‘000



61

12. INTANGIBLE ASSETS

Computer software 111,143 163,645

The following additions have been made to intangible assets during the period:

Rupees in ‘000

30 June2019


31 December2018

12.1 Additions: - directly purchased 7,420 7,647

13. DEFERRED TAX ASSETS

Deductible temporary differences

Provision for diminution in value of investments 157,399 146,297Provision for non-performing and off - balance sheet 2,334,439 2,746,495Provision against other assets 198 198Deficit on revaluation of investments 3,396,679 3,097,834Deferred liability on defined benefit plan 61,866 71,680Others 1,104 1,494

5,951,685 6,063,998Taxable temporary differences

Surplus on revaluation of non-banking assets (95,866) (96,632)Accelerated depreciation (97,418) (145,898)

(193,284) (242,530)Net deferred tax asset 5,758,401 5,821,468

Rupees in ‘000



Rupees in ‘000

30 June2019


31 December2018

62

Rupees in ‘000

30 June2019


31 December2018

Note

14. OTHER ASSETS

Income / mark-up / profit accrued in local currency - net of provision 10,104,764 8,244,570Income / mark-up / profit accrued in foreign currencies - net of provision 30,936 29,916Advances, deposits, advance rent and other prepayments 561,599 765,427Advance taxation (payments less provision) 918,799 537,724Non-banking assets acquired in satisfaction of claims 484,119 487,505Branch adjustment account 120 63Mark to market gain on forward foreign exchange contracts 17,460,204 4,206,429Acceptances 15,792,147 14,429,148Receivable from the SBP against encashment of government securities 189,273 114,055Advance against vehicles for diminishing musharaka – 78,126Stationery and stamps on hand 68,845 62,789Dividend receivable 30,436 769Others 387,989 408,805

46,029,231 29,365,326

Provision against other assets 14.1 (210,678) (210,678)Other assets (net of provision) 45,818,553 29,154,648

Surplus on revaluation of non-banking assets acquired in satisfaction of claims 19 273,903 276,093

46,092,456 29,430,74114.1 Provision held against other assets

Operational loss 210,000 210,000Other receivable 678 678

210,678 210,67815. BILLS PAYABLE

In Pakistan 14,363,746 12,173,407

63

17. DEPOSITS AND OTHER ACCOUNTS

In localcurrency


In foreigncurrency

Total


Rupees in ‘000

In foreigncurrency

Rupees in ‘000

30 June2019


31 December2018

16. BORROWINGSSecuredBorrowings from the State Bank of Pakistan

Under export refinance scheme 31,171,116 24,196,093Under long term financing facility - renewable energy 962,784 962,784Under long term financing facility - locally

manufactured plant and machinery 8,935,332 6,730,91541,069,232 31,889,792

Repurchase agreement borrowings (Repo) 16.1 101,732,435 12,658,729Due against bills rediscounting 3,243,466 3,310,164

146,045,133 47,858,685UnsecuredCall borrowing – 300,000Certificate of investment 1,199,278 1,411,393Murabaha financing 225,000 250,000Overdrawn nostro accounts 4,623,199 3,183,003Overdrawn local bank accounts 5,693 5,693

6,053,170 5,150,089152,098,303 53,008,774

16.1 These carry mark-up rates ranging between 12.25 % to 12.42 % per annum and will mature upto 26 July 2019.

CustomersCurrent accounts

(non-remunerative) 148,677,524 29,703,316 178,380,840 120,602,372 23,351,234 143,953,606Savings deposits 129,857,516 20,980,758 150,838,274 122,954,951 17,173,301 140,128,252Term deposits 180,757,525 50,502,155 231,259,680 179,602,186 43,693,831 223,296,017Others 9,470,460 1,012 9,471,472 7,984,099 906 7,985,005

468,763,025 101,187,241 569,950,266 431,143,608 84,219,272 515,362,880Financial institutionsCurrent deposits

(non-remunerative) 1,187,214 975,870 2,163,084 1,489,569 942,405 2,431,974Savings deposits 11,929,036 – 11,929,036 24,109,273 70 24,109,343Term deposits 7,675,000 4,910 7,679,910 931,000 4,260 935,260

20,791,250 980,780 21,772,030 26,529,842 946,735 27,476,577489,554,275 102,168,021 591,722,296 457,673,450 85,166,007 542,839,457

64

Rupees in ‘000

30 June2019


31 December2018

Note

18.1 Provision against off-balance sheet obligationsOpening balance 113,716 113,716Charge for the period / year – –Closing balance 113,716 113,716

The above represents provision against certain letters of credit and guarantees.

18. OTHER LIABILITIES

Mark-up / return / interest payable in local currency 8,018,506 6,520,736Mark-up / return / interest payable in foreign currencies 277,720 362,013Unearned commission and income on bills discounted 189,296 190,533Accrued expenses 1,221,115 785,163Acceptances 15,792,147 14,429,148Unclaimed dividend 905,562 107,725Mark to market loss on forward foreign exchange contracts 11,155,193 3,549,157Provision for compensated absences 219,225 208,864Deferred liability on defined benefit plan 260,875 202,404Provision against off-balance sheet obligations 18.1 113,716 113,716Workers' welfare fund 1,065,495 952,940Charity fund balance 493 291Excise duty payable 1,062 1,003Locker deposits 792,753 764,223Advance against diminishing musharaka 122,899 98,166Advance rental for ijarah 1,806 2,259Security deposits against leases / ijarah 666,742 657,958Sundry creditors 655,989 673,480Lease liability against right-of-use assets 3.2.1 3,364,483 –Withholding tax / duties 272,203 339,235Others 274,996 406,376

45,372,276 30,365,390

19. (DEFICIT) / SURPLUS ON REVALUATION OF ASSETS(Deficit) / surplus on revaluation of

- Non-banking assets 273,903 276,093- Available-for-sale securities 9.1 (9,667,949) (8,806,264)

(9,394,046) (8,530,171)Less: Deferred tax on (deficit) / surplus on revaluation of

- Non-banking assets 95,866 96,632- Available-for-sale securities (3,396,679) (3,097,834)

3,300,813 3,001,202(6,093,233) (5,528,969)

Surplus / (deficit) pertaining to non-controlling interest (26,921) (33,160)(6,120,154) (5,562,129)

65

Rupees in ‘000

30 June2019


31 December2018

Note

20. CONTINGENCIES AND COMMITMENTS

Guarantees 20.1 61,408,275 53,215,390Commitments 20.2 409,794,815 323,117,101Other contingent liabilities 20.3 25,401,940 24,476,694

496,605,030 400,809,185

20.1 GuaranteesFinancial Guarantees 5,978,479 3,931,150Performance Guarantees 26,817,595 32,514,435Other guarantees 28,612,201 16,769,805

61,408,275 53,215,390

20.2 CommitmentsDocumentary credits and short-term trade-related transactions:

Letters of credit 76,815,611 89,700,969Commitments in respect of:

Forward exchange contracts 20.2.1 328,079,236 230,915,612Operating leases 20.2.2 – 99,427Forward lendings 20.2.3 4,779,226 2,267,933Acquisition of operating fixed assets 120,742 133,160

409,794,815 323,117,101

20.2.1 Commitments in respect of forward exchange contractsPurchase 188,802,754 136,568,523Sale 139,276,482 94,347,089

328,079,236 230,915,612

20.2.2 Commitments in respect of operating leasesNot later than one year – 99,427Later than one year and not later than five years – –

– 99,427

66

2018

Rupees in ‘000

2019(Un-Audited)

31 December

(Audited)

30 June

20.2.3 Commitments in respect of forward lendingsThe Group has made commitments to extend credit in the normal course of its business, but noneof these commitments are irrevocable and do not attract any penalty if the facility is unilaterallywithdrawn, except for:

Note

21. DERIVATIVE FINANCIAL INSTRUMENTS

The holding company deals in derivative financial instruments namely forward foreign exchange contracts and foreigncurrency swaps with the principal view of hedging the risks arising from its trade business.

As per the holding company’s policy, these contracts are reported on their fair value at the statement of financial positiondate. The gains and losses from revaluation of these contracts are included under “income from dealing in foreigncurrencies”. Unrealised mark-to-market gains and losses on these contracts are recorded on the statement of financialposition under “other assets / other liabilities”.

These products are offered to the holding company’s customers to protect from unfavourable movements in foreigncurrencies. The holding company hedges such exposures in the inter-bank foreign exchange market.

These positions are reviewed on a regular basis by the holding company’s Asset and Liability Committee (ALCO).

Commitments in respect of syndicate financing 4,440,923 1,887,433Commitments in respect of financing transaction 338,303 380,500

4,779,226 2,267,933

20.3 Other contingent liabilities

Claims against bank not acknowledged as debt 25,295,884 24,370,638Foreign Exchange repatriation case 20.3.1 106,056 106,056

25,401,940 24,476,694

20.3.1 Foreign exchange repatriation case

While adjudicating foreign exchange repatriation cases of exporters, the Foreign Exchange AdjudicatingCourt of the State Bank of Pakistan has adjudicated penalty of Rs. 106,056 thousand, arbitrarily onthe holding company. The holding company has filed appeals before the Appellate Board andConstitutional Petitions in the Honorable High Court of Sindh against the said judgment. TheHonorable High Court has granted relief to holding company by way of interim orders. Based onmerits of the appeals management is confident that these appeals shall be decided in favor of theholding company and therefore no provision has been made against the impugned penalty.

67

22. MARK-UP / RETURN / INTEREST EARNED

Loans and advances 12,189,407 5,932,161Investments 15,547,492 13,702,609Lendings to financial institutions 3,228,384 374,697Balance with other banks 54,497 21,792

31,019,780 20,031,259

23. MARK-UP / RETURN / INTEREST EXPENSED

Deposits 17,657,399 9,421,410Borrowings 2,337,529 2,110,632Foreign currency swap cost 1,923,332 522,777Lease liability against right-of-use assets 228,766 –

22,147,026 12,054,819

24. FEE & COMMISSION INCOME

Branch banking customer fees 122,805 135,375Credit related fees 30,292 23,492Card related fees 178,408 126,200Commission on trade 1,760,757 1,282,701Commission on guarantees 228,739 195,907Commission on remittances including home remittances 14,931 14,255Commission on bancassurance 57,548 40,554Others 57,570 60,713

2,451,050 1,879,197

25. GAIN / (LOSS) ON SECURITIES

RealisedFederal government securities (725,310) 16,529Mutual funds and shares 5,629 65,430

(719,681) 81,959

26. OTHER INCOME

Rent on properties 17,023 10,908Gain on sale of fixed assets - net 9,526 907Recovery of charges from customers 132,244 100,341Incidental and service charges 42,723 45,565Gain on sale of ijarah assets - net 6,973 7,095Gain on sale of non-banking assets - net – 202,282Gain on sale of non-current assets held-for-sale - net – 35,042Staff notice period and other recoveries 2,017 1,773

210,506 403,913

Rupees in ‘000



68

27. OPERATING EXPENSES

Total compensation expense 2,944,548 2,787,581

Property expenseRent & taxes 156,996 533,320Insurance 2,490 2,088Utilities cost 169,538 146,232Security 231,856 216,377Repair & maintenance 180,658 190,640Depreciation 549,820 171,879

1,291,358 1,260,536

Information technology expensesSoftware maintenance 56,601 15,912Hardware maintenance 68,954 61,340Depreciation 71,448 54,149Amortisation 59,922 62,433Network charges 97,170 75,296

354,095 269,130

Other operating expensesDirectors' fees and allowances 5,698 6,648Fees and allowances to shariah board 5,137 4,158Legal & professional charges 78,282 68,895Outsourced services costs 128,716 113,911Travelling & conveyance 120,713 83,950NIFT and clearing charges 39,212 37,287Depreciation 211,821 177,591Depreciation - non-banking assets 5,577 6,377Training & development 12,852 9,776Postage & courier charges 45,355 39,630Communication 51,182 47,957Subscription 79,442 70,468Brokerage & commission 33,829 51,571Stationery & printing 113,656 91,140Marketing, advertisement & publicity 71,489 155,272Management fee 202,554 174,791Insurance 254,681 83,232Donations 50,820 46,040Auditors’ remuneration 10,199 10,192Others 169,733 111,572

1,690,948 1,390,458

Total 6,280,949 5,707,705

Rupees in ‘000



69

28. OTHER CHARGES

Penalties imposed by the SBP 41,295 14,802

29. PROVISIONS & WRITE OFFS - NET

Provision for diminution in value of investments - net 9.2.1 31,720 24,481Provision / (reversal) of provision against loan & advances - net 10.4 (135,047) 493,750Reversal of provision against other assets – (41,250)Recovery of written off bad debts (3,530) (47,849)

(106,857) 429,13230. TAXATION

Current 1,877,826 1,726,060Prior year 300,548 –Deferred 352,006 81,300

2,530,380 1,807,360

31. BASIC AND DILUTED EARNINGS PER SHARE

Profit attributable to equity shareholders of the holding company 3,201,002 2,954,726

Weighted average number of ordinary shares 1,047,831 1,047,831

Basic and diluted earnings per share 3.05 2.82

Note

Number in ‘000

(Rupees)

32. FAIR VALUE MEASUREMENTS

The fair value of quoted securities other than investments classified as held to maturity, is based on quoted marketprice. Quoted securities classified as held to maturity are carried at cost.

The fair value of unquoted debt securities, fixed term loans, other assets, other liabilities, fixed term deposits andborrowings cannot be calculated with sufficient reliability due to the absence of a current and active market forthese assets and liabilities and reliable data regarding market rates for similar instruments.

32.1 Fair value of financial assets

The Group measures fair values using the following fair value hierarchy that reflects the significance of theinputs used in making the measurements:

Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assetsor liabilities.

Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that areobservable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: Fair value measurements using input for the assets or liabilities that are not based on observablemarket data (i.e. unobservable inputs).

Rupees in ‘000



The table below analyses financial instruments measured at the end of the reporting period by the level inthe fair value hierarchy into which the fair value measurement is categorised:



Rupees in ‘000


Financial assets measured at fair value


70

- Investments- Available-for-sale securities

Federal government securities 352,209,590 – 352,209,590 – 352,209,590Sukuk certificates and bonds 1,404,035 – 1,404,035 – 1,404,035Ordinary shares of listed companies 609,201 609,201 – – 609,201Mutual funds and REIT certificates 385,136 370,256 14,880 – 385,136Listed term finance certificates 3,110,793 – 3,110,793 – 3,110,793Unlisted term finance certificates 25,677 – 25,677 – 25,677

Financial assets not measured at fair value -disclosed but not measured at fair value


- Held-to-maturity securitiesFederal government securities 36,268,199 – – – –


829,107,781 979,457 356,764,975 – 357,744,432

Off-balance sheet financial instrumentsmeasured at fair value

- Forward purchase of foreignexchange contracts 205,395,842 – 205,395,842 – 205,395,842

- Forward sale of foreignexchange contracts 128,988,404 – 128,988,404 – 128,988,404

71

Valuation techniques used in determination of fair valuation of financial instruments withinlevel 2.

Debt securities The fair value is determined using the prices / rates available onMutual Funds Association of Pakistan (MUFAP) / Reuters.

Forward contracts The fair values are derived using forward exchange rates applicableto their respective remaining maturities.

Mutual funds The fair value is determined based on the net asset values publishedat the close of each business day.




Rupees in ‘000



- Available-for-sale securitiesFederal government securities 298,948,531 – 298,948,531 – 298,948,531Sukuk certificates and bonds 1,492,667 – 1,492,667 – 1,492,667Ordinary shares of listed companies 687,775 687,775 – – 687,775Mutual funds and REIT certificates 450,755 435,855 14,900 – 450,755

Listed term finance certificates 3,357,258 – 3,357,258 – 3,357,258Unlisted term finance certificates 59,913 – 59,913 – 59,913

Financial assets not measuredat fair value


- Held-to-maturity securitiesFederal government securities 36,259,349 – – – –Certificates of investments – – – – –

- Available-for-sale securitiesOrdinary shares of unlisted companies 27,920 – – – –

- Advances 236,112,844 – – – –- Other assets 27,511,818 – – – –

666,987,480 1,123,630 303,873,269 – 304,996,899

Off-balance sheet financialinstruments measured at fair value



Profit & LossNet mark-up / return / profit 15,315,745 (10,153,225) 3,710,234 8,872,754Inter segment revenue - net (11,264,033) 10,690,727 573,306 –Non mark-up / return / interest income (924,843) 165,785 4,105,488 3,346,430


Total expenses (2,283,342) (444,539) (3,708,039) (6,435,920)Provisions (31,718) 1,202 137,373 106,857

Profit before tax 811,809 259,950 4,818,362 5,890,121

Balance SheetCash & bank balances 1,147,347 47,179,260 38,745,289 87,071,896Investments 394,061,389 – – 394,061,389Lendings to financial institutions 21,148,260 – – 21,148,260Advances - performing – 3,412,664 279,019,550 282,432,214Advances - non-performing – 7,633 16,806,362 16,813,995Provision against advances – (12,975) (16,402,747) (16,415,722)Net inter segment lending – 284,200,661 – 284,200,661Others 9,343,992 50,929 50,219,674 59,614,595

Total assets 425,700,988 334,838,172 368,388,128 1,128,927,288

Borrowings 109,604,793 – 42,493,510 152,098,303Subordinated debt – – – –Deposits & other accounts (94,562) 330,250,211 261,566,647 591,722,296Net inter segment borrowing 274,785,681 – 9,414,980 284,200,661Others 235,070 4,587,961 54,912,991 59,736,022

Total liabilities 384,530,982 334,838,172 368,388,128 1,087,757,282Equity 41,170,006 – – 41,170,006

Total equity & liabilities 425,700,988 334,838,172 368,388,128 1,128,927,288


72

TotalTrade &Sales

RetailBanking

CommercialBanking


Rupees in ‘000

33. SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES

73

TotalTrade &Sales

RetailBanking

CommercialBanking


Rupees in ‘000

Balance SheetCash & bank balances 1,209,795 24,672,447 24,211,613 50,093,855Investments 341,284,168 – – 341,284,168Lendings to financial institutions 11,984,795 – – 11,984,795Advances - performing – 3,167,829 231,825,798 234,993,627Advances - non-performing – 6,649 17,673,258 17,679,907Provision against advances – (11,773) (16,548,917) (16,560,690)Net inter segment lending – 254,934,343 48,738,775 303,673,118Others 12,852,393 52,983 26,458,340 39,363,716

Total assets 367,331,151 282,822,478 332,358,867 982,512,496

Borrowings 19,457,589 – 33,551,185 53,008,774Subordinated debt – – – –Deposits & other accounts – 279,208,331 263,631,126 542,839,457Net inter segment borrowing 303,673,118 – – 303,673,118Others 3,748,094 3,614,147 35,176,556 42,538,797

Total liabilities 326,878,801 282,822,478 332,358,867 942,060,146Equity 40,452,350 – – 40,452,350

Total equity & liabilities 367,331,151 282,822,478 332,358,867 982,512,496



Profit & LossNet mark-up / return / profit 11,554,334 (1,421,635) (2,156,259) 7,976,440Inter segment revenue - net (9,726,739) 2,065,473 7,661,266 –Non mark-up / return / interest income (159,210) 105,411 3,209,233 3,155,434


Total expenses (2,365,627) (109,258) (3,346,602) (5,821,487)Provisions (24,477) (3,300) (401,355) (429,132)

Profit before tax (721,719) 636,691 4,966,283 4,881,255

74

Balances with other banksIn current accounts 157,116 64,260 – – – 221,376

AdvancesOpening balance 890 2,820,520 115,507 – – 2,936,917Addition during the period – 12,807,414 68,751 – – 12,876,165Repaid during the period (328) (12,263,871) (8,113) – – (12,272,312)Closing balance 562 3,364,063 176,145 – – 3,540,770

Other assetsMark-up / return / interest accrued – 14,692 – – – 14,692Prepayments / advance deposits / Other receivable – 13,562 – – – 13,562

– 28,254 – – – 28,254

BorrowingsOpening balance 8,823 – – – – 8,823Borrowings during the period 1,489 – – – – 1,489Settled during the period (8,823) – – – – (8,823)Closing balance 1,489 – – – – 1,489

DepositsOpening balance 396,056 16,199,005 163,874 731,175 3,689,624 21,179,734Received during the period 6,567,482 881,181,568 1,375,638 1,687,237 4,839,209 895,651,134Withdrawn during the period (6,496,125) (881,539,490) (1,169,296) (1,574,963) (4,981,311) (895,761,185)Closing balance 467,413 15,841,083 370,216 843,449 3,547,522 21,069,683

Other liabilitiesMark-up / return / interest payable – 366,957 2,121 5,369 724,852 1,099,299Management fee payable for technical and consultancy services* 163,731 – – – – 163,731Payable against purchase of securities 23,047 – – – – 23,047Other payables – 7,873 – – 260,875 268,748

186,778 374,830 2,121 5,369 985,727 1,554,825

Contingencies & commitmentsTransaction-related contingent liabilities – 8,183,769 – – – 8,183,769Trade-related contingent liabilities – 355,802 – – – 355,802

– 8,539,571 – – – 8,539,571

34. TRANSACTIONS WITH RELATED PARTIESThe Group has related party relationships with its ultimate parent company, associates, companies with common directorship, keymanagement personnel, directors and employees' retirement benefit plans.

Contributions in respect of employees' retirement benefits are made in accordance with actuarial valuation and terms of contributionplan. Salaries & allowances of the key management personnel are in accordance with the terms of their employment. Other transactionsare at agreed terms.

Ultimateparent

company

Associates Keymanagement

personnel


Total

Rupees in ‘000


Directors

* Management fee is as per the agreement with the ultimate parent company.

75

Balances with other banksIn current accounts 112,023 44,688 – – – 156,711

AdvancesOpening balance 2,204 1,704,636 172,585 – – 1,879,425Addition during the year – 74,713,838 47,080 – – 74,760,918Repaid during the year (1,314) (73,597,954) (104,158) – – (73,703,426)Closing balance 890 2,820,520 115,507 – – 2,936,917

Other assetsMark-up / return / interest accrued – 17,113 – – – 17,113Prepayments / advance deposits / Other Receivable – 6,293 – – – 6,293Receivable against purchase of securities 9,174 – – – – 9,174

9,174 23,406 – – – 32,580

BorrowingsOpening balance – – – – – –Borrowings during the year 8,823 – – – – 8,823Settled during the year – – – – – –Closing balance 8,823 – – – – 8,823

DepositsOpening balance 731,705 21,061,604 168,539 675,958 2,404,120 25,041,926Received during the year 8,548,305 1,648,037,662 600,685 2,393,366 6,166,560 1,665,746,578Withdrawn during the year (8,883,954) (1,652,900,261) (605,350) (2,338,149) (4,881,056) (1,669,608,770)Closing balance 396,056 16,199,005 163,874 731,175 3,689,624 21,179,734

Other liabilitiesMark-up / return / interest payable – 351,586 1,295 3,205 633,330 989,416Management fee payable for technical and consultancy services * 115,344 – – – – 115,344Other payables – 6,391 – – 202,404 208,795

115,344 357,977 1,295 3,205 835,734 1,313,555

Contingencies & commitmentsTransaction-related contingent liabilities – 7,531,999 – – – 7,531,999Trade-related contingent liabilities – 1,999,428 – – – 1,999,428Commitment against operating leases – 1,681 – – – 1,681

– 9,533,108 – – – 9,533,108

Ultimateparent

company

Associates Keymanagement

personnel


Total

Rupees in ‘000


Directors


76



Ultimateparent

company

Total


Rupees in ‘000


personnel


Income

Mark-up / return / interest earned 430 71,462 5,051 – – 76,943

Fee and commission income 2,658 108,329 – 20 – 111,007

Rent income 2,809 – – – – 2,809

Expense

Mark-up / return / interest expensed – 745,491 11,755 32,030 212,944 1,002,220

Commission / brokerage / bankcharges paid 273 613 – – – 886

Salaries and allowances – – 252,000 – – 252,000

Directors' fees and allowances – – – 5,698 – 5,698

Charge to defined benefit plan – – – – 86,769 86,769

Contribution to definedcontribution plan – – – – 98,098 98,098

Operating lease rentals / rent expenses – 6,963 – – – 6,963

Insurance premium expenses – 6,328 – – – 6,328

Maintenance, electricity, stationery &entertainment – 45,075 – – – 45,075

Management fee expense fortechnical and consultancyservices * 202,554 – – – – 202,554

Donation – 7,960 – – – 7,960

Professional / other charges – 1,564 – – – 1,564

77



Ultimateparent

company

Total


Rupees in ‘000


personnel


Income

Mark-up / return / interest earned 2,049 27,423 3,653 – – 33,125

Fee and commission income 3,562 81,013 – 14 – 84,589

Rent income 2,808 – – – – 2,808

Expenses

Mark-up / return / interest expensed – 520,636 3,780 15,667 122,526 662,609

Commission / brokerage / bankcharges paid 632 599 – – – 1,231

Salaries and allowances – – 156,539 – – 156,539

Directors' fees and allowances – – – 6,648 – 6,648

Charge to defined benefit plan – – – – 76,520 76,520

Contribution to definedcontribution plan – – – – 92,180 92,180

Operating lease rentals / rent expenses – 6,533 – – – 6,533

Insurance premium expenses – 5,738 – – – 5,738

Maintenance, electricity, stationery &entertainment – 36,278 – – – 36,278

Management fee expense fortechnical and consultancyservices * 174,791 – – – – 174,791

Donation – 11,738 – – – 11,738

78

2018

Minimum Capital Requirement (MCR):Paid-up capital (net of losses) 10,478,315 10,478,315

Capital Adequacy Ratio (CAR):Eligible Common Equity Tier 1 (CET 1) capital 35,722,868 34,907,701Eligible Additional Tier 1 (ADT 1) capital – –Total eligible tier 1 capital 35,722,868 34,907,701Eligible tier 2 capital 1,312,821 915,322Total eligible capital (tier 1 + tier 2) 37,035,689 35,823,023

Risk Weighted Assets (RWAs):Credit risk 269,434,791 235,418,319Market risk 1,248,501 1,571,342Operational risk 36,732,186 36,732,186

Total 307,415,478 273,721,847

CET 1 capital adequacy ratio 11.62% 12.75%

Tier 1 capital adequacy ratio 11.62% 12.75%

Total capital adequacy ratio 12.05% 13.09%

Minimum capital requirements prescribed by SBPCommon equity tier 1 capital adequacy ratio 6.00% 6.00%Tier 1 capital adequacy ratio 7.50% 7.50%Total capital adequacy ratio 11.90% 11.90%

Simple, maturity method and basic indicator approach for credit risk, market risk and operational risk exposuresrespectively have been used in the capital adequacy calculation.

Leverage Ratio (LR):Eligible tier-1 capital 35,722,868 34,907,701Total exposures 1,008,410,787 830,913,057Leverage ratio 3.54% 4.20%

Rupees in ‘000

30 June2019


31 December

35. CAPITAL ADEQUACY, LEVERAGE RATIO & LIQUIDITY REQUIREMENTS

79

Rupees in ‘000

36. ISLAMIC BANKING BUSINESSThe holding company is operating 31 (31 December 2018: 31) islamic banking branches and 219 (31 December 2018:216) islamic banking windows at the end of the period / year.

Note2018

30 June2019

31 December


ASSETSCash and balances with treasury banks 3,343,631 3,340,608Balances with other banks – –Due from financial institutions 36.1 17,154,371 1,000,000Investments 36.2 9,887,722 21,312,705Islamic financing and related assets - net 36.3 21,051,009 17,715,168Fixed assets 36.4 568,197 82,121Intangible assets – –Due from head office 1,241,435 1,056,134Other assets 2,026,938 1,605,849

Total assets 55,273,303 46,112,585

LIABILITIESBills payable 579,265 657,934Due to financial institutions 2,779,895 1,864,574Deposits and other accounts 36.5 46,474,756 38,684,214Due to head office – –Subordinated debt – –Other liabilities 36.4 1,813,191 1,473,908

51,647,107 42,680,630

NET ASSETS 3,626,196 3,431,955

REPRESENTED BYIslamic banking fund 3,004,001 3,003,472Reserves – –Surplus / (deficit) on revaluation of assets 10,266 (17,981)Unappropriated profit 36.9 611,929 446,464

3,626,196 3,431,955CONTINGENCIES AND COMMITMENTS 36.6

80

The profit and loss account of the holding company's islamic banking branches for the period ended 30 June 2019is as follows:

Note

36.1 Due from financial institutions

In localcurrency


In foreigncurrency

Total


Rupees in ‘000UnsecuredMusharaka 4,500,000 – 4,500,000 1,000,000 – 1,000,000Bai-muajjal receivable

from State Bankof Pakistan 12,654,371 – 12,654,371 – – –

17,154,371 – 17,154,371 1,000,000 – 1,000,000

In foreigncurrency

Profit / return earned 36.7 2,233,982 1,269,522Profit / return expensed 36.8 (1,391,970) (855,760)

Net profit / return 842,012 413,762

Other income

Fee and commission income 72,800 68,018Dividend income – –Foreign exchange income 19,146 13,311Income / (loss) from derivatives – –Gain / (loss) on securities 415 (22)Other income 10,467 8,238

Total other income 102,828 89,545

Total income 944,840 503,307

Other expenses

Operating expenses 332,699 292,201Workers welfare fund – –Other charges 85 107

Total other expenses 332,784 292,308

Profit / (loss) before provisions 612,056 210,999Provisions and write offs - net (127) (9,150)

Profit / (loss) before taxation 611,929 201,849

Rupees in ‘000



Rupees in ‘000

201830 June

201931 December


81


Rupees in ‘000

Cost /amortised

cost

Provisionfor

diminution

Surplus /(deficit)

36.2 Investments by segments:

Carryingvalue

Cost /amortised

cost

Provisionfor

diminution

Surplus /(deficit)

Carryingvalue

Federal government securities:

– Ijarah sukuks – – – – 11,313,145 – (26,794) 11,286,351– Bai-muajjal 3,608,688 – – 3,608,688 3,608,688 – – 3,608,688

3,608,688 – – 3,608,688 14,921,833 – (26,794) 14,895,039Non government debt securities– Listed 5,469,285 – 4,334 5,473,619 5,537,142 – 3,805 5,540,947– Unlisted 799,483 – 5,932 805,415 871,711 – 5,008 876,719

6,268,768 – 10,266 6,279,034 6,408,853 – 8,813 6,417,666Total investments 9,877,456 – 10,266 9,887,722 21,330,686 – (17,981) 21,312,705

36.3 Islamic financing and related assets - net

Ijarah 375,998 398,097Murabaha 5,971,349 5,906,879Working capital musharaka 3,325,244 2,533,380Diminishing musharaka 4,032,551 3,532,275Istisna 707,659 1,029,204Export refinance murabaha 452,709 497,902Export refinance istisna 663,759 923,713Al-bai financing 481,071 316,194Advances against:

Ijarah 164,578 123,988Murabaha 831,656 349,302Diminishing musharaka 1,203,926 596,470Istisna 1,301,164 1,064,759Export refinance murabaha 62,648 127,507Export refinance istisna 1,319,540 326,288

Inventory related toAl-bai goods 381,141 240,116Istisna goods 194,638 167,589

Gross islamic financing and related assets 21,469,631 18,133,663Provision against non-performing islamic financings (418,622) (418,495)Islamic financing and related assets - net of provision 21,051,009 17,715,168

82

36.5 Deposits

CustomersCurrent deposits 10,699,451 8,363,646Savings deposits 17,988,564 18,287,455Term deposits 10,400,920 10,834,638

39,088,935 37,485,739Financial InstitutionsCurrent deposits 12,072 2,054Savings deposits 848,749 756,421Term deposits 6,525,000 440,000

7,385,821 1,198,47546,474,756 38,684,214

36.6 Contingencies and commitmentsGuarantees 1,149,819 1,893,613Commitments 3,335,895 3,362,786

4,485,714 5,256,399

Rupees in ‘000

30 June2019


31 December2018

36.4 Fixed assets and other liabilities

At 30 June 2019, fixed asset included right-of-use assets of Rs. 514,220 thousand and other liabilities includedrelated lease liability of Rs 510,956 thousand more fully explained in note 3.2.1.

Rupees in ‘000



36.7 Profit / return earned of financing, investments and placement

Profit earned on:Financing 883,347 438,479Investments 934,253 711,871Placements 416,382 119,172

2,233,982 1,269,522

36.8 Profit on deposits and other dues expensed

Deposits and other accounts 1,328,808 837,354Due to financial institutions 28,491 18,406Discount expense on lease liability against right-of-use assets 34,671 –

1,391,970 855,760

83

37. GENERAL

37.1 The figures have been rounded off to nearest thousand rupees, unless otherwise stated.

37.2 Corresponding figures have been re-classified, re-arranged or additionally incorporated in these consolidatedcondensed interim financial statements wherever necessary to facilitate comparison and better presentationin accordance with the revised forms of quarterly financial statements of the Banks' issued by the SBP throughits BPRD Circular letter No. 05 of 2019. Further, incremental depreciation on surplus arising on revaluation ofnon-banking assets of Rs. 1,424 thousand (30 June 2018 : Rs 1,424 thousand) earlier included in statementof comprehensive income has been included directly in the statement of changes in equity for a moreappropriate presentation.

38. DATE OF AUTHORISATION FOR ISSUE

These consolidated condensed interim financial statements were authorised for issue on 22 August 2019 by the Boardof Directors of the holding company.

Rupees in ‘000

30 June2019


31 December2018

36.9 Unappropriated profit

Opening balance 446,464 283,058Add: Islamic banking profit for the period 611,929 446,464Less: Transferred to head office (446,464) (283,058)

Closing balance 611,929 446,464



half yearly accounts 2019 - psx.com.pk mohsin a. nathani muhammad h. habib human resource &...

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